The Internationalisation of Football Clubs. Analysis of RasenBallsport Leipzig’s Marketing Possibilities in Southeast Asia and Recommendations

Table of contents

List of Appendices

List of Abbreviations

Table of Figures

List of Tables

1. Introduction
1.1 Objective of the Thesis
1.2 Structure of the Thesis
1.3 Interview Partners

2. Theoretical framework
2.1 Definition and differentiation of the term Internationalisation
2.2 Internationalisation‟s Relevance
2.3 Market Entry Strategies
2.3.1 Online presence
2.3.2 Exporting
2.3.3 International Licensing
2.3.4 International Franchising
2.3.5 Strategic Alliances
2.3.6 Joint Ventures
2.3.7 Acquisition
2.3.8 Greenfield Investment
2.4 Influencing Factors
2.4.1 Internal Factors
2.4.2 External Factors

3. Status Quo of Internationalisation in German Football
3.1 The role of the “DFL Deutsche Fußball Liga GmbH”
3.2 Comparison of Bundesliga teams‟ Internationalisation processes
3.3 German football in international comparison
3.4 The choice of RasenBallsport Leipzig as example for this thesis

4. RasenBallsport Leipzig‟s Internationalisation Process
4.1 Methodology
4.2 SWOT Analysis of RB Leipzig
4.2.1 Strengths
4.2.2 Weaknesses
4.2.3 Opportunities
4.2.4 Threats
4.3 RasenBallsport Leipzig‟s market entry options
4.3.1 Timing
4.3.2 Possible market entry strategies
4.3.2.1 Merchandising
4.3.2.2 Digitalisation
4.3.2.3 Events
4.3.2.4 Players
4.3.2.5 Alliances and Partnerships
4.3.2.6 Complementary measures
4.3.3 Market choice

5. Evaluation of the chosen Southeast Asian target markets
5.1 Introduction to the target markets Indonesia, Malaysia, Singapore and
Thailand
5.1.1 Indonesia
5.1.2 Malaysia
5.1.3 Singapore
5.1.4 Thailand
5.2 Critical factors for Success
5.2.1 Sports-related Factors
5.2.2 Non-sports-related Factors
5.3 Scoring Model of the pre-selected Markets

6. Implications and recommended Internationalisation Modules
6.1 First Recommendation – “The RB Story”
6.2 Second Recommendation – “The All-rounder”
6.3 Third Recommendation – “Big Market”

7. Conclusion, Limitations and Outlook

Appendices

References.

List of Appendices

Appendix 1 – Interview Expert N.1

Appendix 2 – Interview Expert N.2

Appendix 3 – Interview Expert N.3

Appendix 4 – Interview DFL Sports Enterprises GmbH

List of Abbreviations

AG – Public Limited Company (PLC)

approx. – approximately

B2B – business to business

B2C – business to consumer

BSC – Berlin Sport Club

BVB – Ballspielverein Borussia

CEO – Chief Executive Officer

CSR – Corporate Social Responsibility

DFB – Deutscher Fußball Bund

DFL – Deutsche Fußball Liga

e.g. – exempli gratia

Eng. – English

FC – Football Club

FDI – Foreign Direct Investment

FIFA – Fédération Internationale de Football Association

FSV – Football – and Sport Club

GDP – Gross Domestic Product

GmbH – Private Limited Company (Ltd)

IT – Information Technology

No. – Number

RB – RasenBallsport

R&D – Research and Development

SC – Sport Club

SE – Sports Enterprises

SME – Small and medium enterprises

SV – Sport Club

TPP - Trans-Pacific Partnership

TSG – Gymnastic and Sport Association

TV – Television

UEFA – Union of European Football Associations

US – United States

VfB – Verein für Bewegungsspiele

VfL – Verein für Leibesübungen

VR – Virtual Reality

$ – Dollars

€ – Euro

£ – Pound

Table of Figures

Figure 1: Achievement of objectives through strategic gap closing

Figure 2: Market entry strategies in relation to their level of control and intensity of investment

Figure 3: Market entry strategies and consequent revenue flows

Figure 4: Possible market entry strategies in relation to utility and investment

Figure 5: First recommendation - "RB Story"

Figure 6: Second recommendation - "All-round"

Figure 7: Third recommendation - "Big Market"

List of Tables

Table 1: Interviewed persons, their position and their organisation's classification

Table 2: Scoring model of sports-related and non-sports-related criteria

Table 3: Suitability of market entry strategies and the target markets

1. Introduction

The competition between professional football clubs is increasing both on a national as well as on an international level. Clubs do not only experience pressure for sporting success but also for economic profitability. As sporting success can hardly be planned, the club‟s financial well-being needs to be ensured independently from results on the pitch.

The rationale seems obvious, a club‟s higher popularity among fans leads to higher revenues. Football is the most popular sport in the world and almost half of the world‟s population is interested in the sport.¹ With this in mind, it seems naive or even negligent that the majority of professional German football clubs keep on serving the national market only. Sounding like a repeated appeal, Karl-Heinz Rummenigge, CEO of the most internationalised German football club FC Bayern Munich, describes internationalisation as “without any alternative“.² He continues by explaining “without growth on the international markets, you risk the sporting competitiveness“.

With a population of over 600 Million people and a high enthusiasm for football, Southeast Asia invites football clubs to start their internationalisation in the region. Hence only a structured approach and a thoughtful strategy are required to finally and successfully enter these promising markets.

1.1 Objective of the Thesis

The thesis‟ objective is to guide a way to a football club‟s successful internationalisation in Southeast Asia. Clubs willing to seek new business opportunities shall be introduced to the option of internationalising in this specific region. Therefore, this thesis aims at developing a structured approach to plan and implement engagements abroad. The approach includes assessments of the market entrance possibilities and the target markets. Finally, the methodology and results shall be an instrument which can be applied by every professional football club with only little configuration.

1.2 Structure of the Thesis

In order to introduce the reader to the topic, the first part of this thesis discusses theoretic fundamentals. These are essential as they are referred to in a later stage. Next, insights into the Status Quo of German Football are provided so that subsequent analyses can be put into proper context.

By entering the practical part of the thesis, an exemplary professional German Football club is chosen. RasenBallsport Leipzig‟s internationalisation process starts by becoming aware of the club‟s own condition before various ways to enter a foreign market as a football club are revealed. Then, four potential Southeast Asian target markets are examined and ranked critically. The objective assessment of Indonesia, Malaysia, Singapore and Thailand provides the reader with judgements on the countries‟ ability to meet the criteria a successful internationalisation depends on. Additionally, the countries‟ suitability with respect to specific entry strategies is examined. All analyses are bundled to three recommended internationalisation modules which offer different ways to engage in different countries depending on the club‟s objectives, means and willingness to take risks. Finally, the results‟ limitations are indicated, a conclusion is drawn and an outlook is granted.

1.3 Interview Partners

Four interviews were conducted with the purpose of attaining insider information on the topic. Table 1 lists the interviewed experts indicating their responsibilities and a brief classification of their organisation.

Table 1: Interviewe d persons, their positio n and their organisation' s classification

Abbildung in dieser Leseprobe nicht enthalten

Thanks to the expertise and opinions gathered from the interviews , this work gains in practical orientation. In addition, assumptions are confirmed and the experts make further suggestions.

2. Theoretical framework

Subsequent chapters will form the theoretical basis of this thesis. The final parts of this thesis will refer back to Chapter 2 as source of all the assumptions made. Therefore it is important to understand and categorise the term Internationalisation as well as to attain more detailed theoretical knowledge on possible strategic choices and influences.

2.1 Definition and differentiation of the term Internationalisation

Originating from Latin “inter” (Eng. “between”) and “nationalis” (Eng. “nation”) the term “Internationalisation” describes transnational activities.³ From a business point of view, the understanding of internationalisation refers to organisations‟ organised strategic activities across national borders. The purpose of such activities abroad is fully driven by business decisions aiming at revenue generation, reduction of cost and many other economic influences.⁴ Thus, a geographical reorientation of processes is required in order to start pursuing an internationalised strategy. More importantly, one may not consider the term “Globalisation” a synonym to “Internationalisation”. Whereas single companies can internationalise, Globalisation is defined as a worldwide economic development. The level of Globalisation is determined by the degree of interaction between national economies. Consequently, Globalisation fosters standardization and interdependence between economies, their industries and many functions on company level.⁵ Therefore, internationalisation can be regarded as a subchapter and consequence of Globalisation.

2.2 Internationalisation’s Relevance

Today the majority of professional football clubs are organized as corporations, spun off from the traditional legal form non-profit-oriented club. Therefore economic orientation gains in importance. In accordance with the European Union‟s definition, most clubs are to be classified as small and medium-sized enterprises (SME).⁶ However, turnover and balance sheet totals tend to increase annually within the industry. Due to tremendous increases in external investments, broadcasting revenues, licensing and many other revenue sources players‟ transfer prices and salaries increase rapidly. The clubs‟ needs for financial means originate from the assumption that competitiveness is attained by investing in the best and most expensive players. To certain extents, the assumption that sufficient finance is necessary to ensure sportive competitiveness is valid. Consequently, clubs evolve to profit-oriented companies. The explanation of the relation between internationalisation and football clubs in the following paragraphs inevitable.

Three basic motives exist because of which companies decide to switch from a solely national strategy to an international strategy. The appearance of new opportunities is one of the motives and likely to be the most typical reason to enter new geographic markets. It is the strategic leaders‟ responsibility to act in the company‟s best interests. If the company can benefit from internationalisation, the opportunities abroad need to be seized. Among others, such opportunities can consist in optimizing the cost structure, increasing sales volumes by serving foreign demand or hiring qualified employees. Sometimes these new opportunities are a consequence of saturated national markets and help to maintain a company‟s growth phase.

In all cases, internationalisation offers an opportunity to increase a company‟s competitiveness. Based on the GAP-Analysis Figure 1 illustrates how a company‟s achievement of objectives depends on the willingness to seize new opportunities.

Figure 1: Achievement of objectives through strategic gap closing

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation based on Freyer (2011), P 361.

The achievement of a company"s objectives stagnates and eventually decreases if no business development measures are taken. This is, for instance, due to other competitors.. business development resulting in a consequential loss in own market share. By taking rather traditional development measures, the company is able to close this operational gap and can expect long-term achievement of its objectives. However, by engaging in additional strategies such as internationalisation, the company has the opportunity to gain an advantage over not internationalised competitors or to finally close the strategic gap with already internationalised competitors.

The second motivation for intemationalising is based on excess resources. If companies are fortunate enough to possess more resources than necessary to continue the operative business on the national market, it can be considered to reinvest the excess resources abroad. Resources include for instance financial means, workforce and production capacities. Thus, internationalisation allows companies to optimize cost structures by avoiding tax payments or less profitable national investments. A more adequate occupancy of the employees and a more efficient use of production and storage facilities are attained.⁷

Thirdly, relates to forced internationalisation, a less common motive. Due to a weak bargaining position towards business partners, a company can be urged to internationalise. Often this is linked to important clients‟ own internationalisation intentions. Once big companies open new business divisions abroad they expect their suppliers to open production or storage facilities in reach of the big company‟s facilities abroad. This is due to logistical and cost-reduction concerns from the client‟s perspective. In this case, many supplying companies suffer from their dependency on their sales to this important client and cannot risk losing these to a competitor.

Most commonly, football clubs‟ motives for internationalisation are opportunity- based. They pursue such strategies with the purpose of seizing the opportunities offered by foreign markets. As mentioned previously, finical pressure increases continuously. This drives the clubs to be open to new ways in order to develop additional revenue sources.

2.3 Market Entry Strategies

When deciding to enter a foreign market, companies have multiple options to do so. The different modes of entrance firstly depend on the company‟s willingness to give up a certain degree of control over the operations and secondly on the resource input. Each mode also involves consequences for the decision-makers such as flexibility and time horizon. For the sake of completeness, it has to be indicated that additional market entry strategies exist. However, this abstract will specifically focus on access modes that are more likely to be applied by football clubs. For instance, strategies such as contract manufacturing or piggybacking are less suitable for the football industry and will therefore not be discussed. In addition, this abstracts presumes the reader to be familiar with the strategies‟ basics which is why no detailed theoretical explanation will be given. Benefits and drawbacks which are not related to the football industries will be ignored. Moreover, every abstract will present distinct examples how football clubs can apply the concerned entry strategy in practice.

After understanding multiple options to intemationalise, all clubs are able to choose the most suitable modes with respect to their individual condition and objective. The level of control over the internationalisation process and the investment faced by the market entrance are two crucial factors to take into consideration. With regard to the presented market entry strategies below the options can be arranged according to Figure 2, including examples of application related to the football industry.

Figure 2: Market entry strategiesinrelation to their level of control and intensity of investment

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation based on Van Overloop (2009), P 244.

The suitability of the discussed modes to an exemplary football club"s intemationalisation strategy will be examined in chapter 4.

2.3.1 Online presence

It is essential to take into account the importance of online presence. Having an adequate online representation permits companies and clubs to get in touch with the target market on a cost-efficient and fast way. Making extensive content available to everyone creates a perceived tangibility of the club despite the real geographic distance to the customer abroad. Content predominantly includes E-Commerce, Social Media, an international Homepage and audio-visual content. Published content allows exact adjustments to the target market‟s demand and increases popularity long before the actual physical entrance. Having an online presence is a prerequisite in today‟s digitalised world. Interaction, entertainment on demand and being kept up-to- date are value-adding services that are easily transmittable to foreign fans without great investments.⁸

2.3.2 Exporting

One of the first steps in expanding to markets abroad is exporting. Since the advent of the internet and online shopping exporting has become even more convenient.

In most cases, companies intending to enter foreign markets for the first time decide to export their products or services. Direct and indirect exporting comes along with many advantages to the exporter. Its major benefit concerns the limited capital necessary to sell products or services to a foreign country and therefore the low risk. The investment is low since the initial costs to setting up the company‟s export activities are reasonable and avoid establishing expensive own subsidiaries in the host country. Incurred costs are limited to the usual market research, advertising activities and distribution. Distribution can either be assigned to a local distributor or be executed by setting up own distribution facilities in the host country. However, for risk-limiting purposes, new entrants often choose to rely on local distributors before deciding to engage in this precise country on longer terms by opening own stores. Working with local distributors is flexible, adjustable and permits to make use of the distributor‟s expertise. Moreover, the company can operate activities carefully and decide at what rate it wishes to penetrate the new market and gain knowledge it as well as on the customers. Drawbacks associated with exporting are high transport prices, taxes, customs and regulations from the host country. Losing control over the sales by hiring a local distributor is the greatest disadvantage though. The agent could also work with competitors making all marketing efforts futile. This relates for example to pricing and the product‟s presentation in the retail shops.⁹

A popular example of a football club applying the export strategy is selling merchandise articles like jerseys, caps etc. to a foreign country. These can be sold directly via an online-shop or for instance by outfitters‟ local stores like e.g. Adidas, Nike or Puma.

2.3.3 International Licensing

Licensing describes a contractual relationship between the licensor and the licensee. In return for a royalty payment to the licensor, the licensee is granted permission to use distinct patents, brands, trademarks or other intellectual property. These can help the licensee to produce a product or to increase sales due to the trademark‟s popularity. The licensing agreements tend to be very detailed defining the amount of the royalty, the license granted as well as the records the licensee has to present to the licensor. These records are especially important regarding quality standards and sales numbers as the licensor needs to evaluate whether licensing is still the best choice of serving the foreign market. Poor performance of the licensee can lead to excess opportunity costs for the licensor who could then consider another internationalisation strategy for more suitable.

Besides the royalty fees the licensor‟s advantage is that no physical entrance on the market is required. This is convenient if the licensor has no knowledge on the foreign market or lacks the resources to enter it physically. As licensing agreements usually are finite, the licensor can use licensing to serve the market initially and then enter physically after the termination of the agreement. This allows the licensor to study the market‟s sales potential and to gather knowledge without great financial commitment. Nevertheless, a controlling body will constantly oversee whether the licensee acts in accordance with the agreement. Licensing should be avoided if the knowledge or technology is too valuable for the licensor to risk disclosure to competitors or to the licensee.¹⁰

Football clubs can make use of international licensing by selling the rights to use the club‟s brand to all kind of companies in the target country. Borussia Dortmund for example licensed their media rights to PPTV providing the Thai broadcaster with additional media content especially produced for the region.¹¹

2.3.4 International Franchising

Similarly to licensing, international franchising is based on a contractual agreement.. Like with licensing the franchisor sells rights to use its intangible property to the franchisee. By agreeing on a franchising contract, the Franchisor allows to copy the company‟s system in return for a royalty payment. The franchisee purchasing the permission, also receives trainings, equipment and support from the franchisor. The difference to licensing consists in the franchisor‟s increased control as the actions of the counterparty are dictated and predetermined. Despite the tight control, the owning franchisee remains in charge of the business and is responsible for its financial performance. McDonald‟s is a popular example for international franchising, currently operating approximately 80% of its restaurants by franchises.¹² The franchisor is experiencing relatively low risk for expanding abroad since the principal investment is made by the franchisee. The initial investment motivates the franchisee to operate the business to the best of his or her ability, which guarantees important returns to the franchisor. Additionally the company manager is likely to possess better expertise on the market making it easy for the franchisors to increase their own knowledge on the foreign country. On the other hand, the franchisee can concentrate on the operational business because products, brand and support are provided by the franchisor. However, this comes along with the obligation to share part of the earnings to the franchisor. Another pitfall especially concerning overseas markets can arise if the franchisor‟s supplies to the franchisee are not accessible in the foreign country.¹³

A franchise of a club‟s talent school model can be one way to enter a market through franchising In this case the club does not run the school abroad. However, the club provides the brand, the equipment and know-how to the franchisee. Experience in coaching, educating and guiding youngsters to their way to becoming professional players is a valuable good making it suitable for a franchise model.

2.3.5 Strategic Alliances

The concept of a strategic alliance is based on a cooperation agreement between two or more autonomous parties. For internationalisation-reasons, the parties should originate from different countries. The cooperation can be established between direct, indirect competitors or unrelated companies with the goal of attaining advantages for all parties by benefiting from the strengths of the others. The agreement is made on a quid pro quo basis meaning that usually no partner buys into an alliance or needs to acquire shares to become part of an alliance. Thereby the nature of alliances can be divided into two kinds depending on their scope. Comprehensive alliances characterise cooperation between companies involving multiple business units such as e.g. marketing, R&D and production. Functional alliances limit the scope of cooperation to one predetermined business unit. This can refer to sole marketing alliances or distribution alliances whose management and implementation are more convenient due to the limited scope. The input of resources depends heavily on the purpose of the alliance. A functional alliance on marketing level will be less investment intensive.

Partnering with a local company allows avoiding complicated entry regulations of the host country. Additionally, the entry can be swiftly realised as the host company‟s knowledge on the local market and distribution networks are available. Another benefit is the reduction of risk. Moreover, the partners can share their knowledge and expertise with each other. Whilst one company may be very experienced in distribution, the other company can give useful advice on cost-efficiency. Concerning internationalisation the host company usually provides expertise on the local market, its special circumstances and hidden impediments. Finally, through all of the benefits outlined above competitive advantages are attained including economies of scale and reduced financial investment. Nevertheless, once a partnership is established, arising incompatibilities between the parties will lead to more issues than benefits. Incompatibility can originate from cultural differences and the change of one partner‟s goals or values. This is why an initial agreement tends to be short-term with the option of being renewed after expiration. As it is built on mutual trust and support, an alliance should only be entered if all parties are convinced that the benefits derived from the partnership are worth disclosing their expertise although this may be their competitive advantage. Partners have to be aware that alliances come along with limited autonomy. As control is shared among the companies, there is no autonomous decision-maker. Nevertheless, the level of control in an alliance is comparably high due to its limited time horizon and the usually low number of partners.¹⁴

Common application of functional alliances between football clubs is to invite other clubs‟ coaches or scouting staff to share knowledge, training methods and new ideas. A more extensive example of comprehensive alliances are international agreements between two clubs relating to youth development whereby the internationalising club transfer knowledge and provide the partner club with coaches. In return, direct access to future talents and the market can be attained.

2.3.6 Joint Ventures

Joint Ventures are a form of Foreign Direct Investment (FDI) uniting two or more companies who together form a new legal entity for distinct business purposes. Shares of the parent companies are not necessarily distributed equally. The partners agree to share the Joint Venture‟s profits and losses and provide personnel for the new company‟s managers and its board. Besides the fact that a wholly new legal entity is founded a further difference of Joint Ventures to strategic alliances consists in the time horizon. As long as the venture‟s purpose persists, its existence is infinite. In some cases, founding a Joint Venture with a foreign company is a prerequisite to enter this very market. China is a popular example for limiting the access to its market to foreign companies. Regulations force foreign companies to form contractual alliances with Chinese companies in order to access the market. Nevertheless, the internationalising company benefits in further ways. The host company‟s knowledge on the local market is very valuable especially with respect to political circumstances, customer preferences and distributional issues. Moreover, financial investments and incurred costs will be borne by all partners limiting the risk for the individual company. However, sharing risks signifies sharing control as well. More specifically, the internationalising company tends to lose even more control over its technology and the Joint Venture‟s operations than its proportion of interest in the new company suggests. This is because the venture is located in the partner company‟s country and consequently has better access and a closer connection to the Joint Venture. This requires the internationalising company to make sure to obtain a majority interest in the common subsidiary. Similar to strategic alliances the issue of changing purposes can be encountered with Joint Ventures. The agreement is made for determined purposes, however one party‟s goals can change leading to discrepancies between the partners. Eventually, conflicts of interest can result in the dissolution of the founded company. Joint Ventures offer an alternative to strategic alliances coming along with moderate investment and control depending on the internationalising company‟s proportion of interest in the venture.¹⁵

Ajax Amsterdam‟s subsidiary “Ajax International” started ventures concerning boarding schools and entire clubs around the world. In partnership with local clubs, the Dutch act as parent company with the goals of marketing Ajax Amsterdam‟s brand and recruiting talents for the professional team. The most popular example is “Ajax Cape Town” of which Ajax Amsterdam acts as the majority shareholder. ¹⁶

2.3.7 Acquisition

Acquiring a local company in the targeted country is a major option when evaluating market entry strategies. It can help to close a strategic deficit quite rapidly but also comes along with many pitfalls. Advantages of acquisitions primarily relate to gain instant access to a market. Moreover, one benefits from skilled local labour, existing distribution channels and all assets like e.g. production facilities as well as an established brand. Despite a presumed increased competitiveness, one needs to be aware that acquiring a company does not only mean acquiring its benefits but also its financial, structural and managerial problems. Even though the acquisition itself is a comparably rapid process, the complete planning, negotiation, realisation and integration is very complex requiring experts in different fields. This is also why an acquisition tends to be a very costly method to enter a foreign market. Of course the acquisition price plus a premium add to the process cost and the cost encountered by the acquired problems. Acquisitions appear to be a major investment. Despite tight control, big operational and financial risks are faced requiring careful and intelligent management.¹⁷

The acquisition of one club by another club is uncommon. Nevertheless, well-funded clubs have the option to acquire e.g. regional talent schools. Another example can be observed in the international football strategy of the energy drink producer Red Bull GmbH. RasenBallsport Leipzig, the subject of this thesis, used to be purchased by Red Bull who then changed the club‟s name. Thus, acquisitions of entire clubs are more likely to be applied by investors tied to the football industry than between clubs.

2.3.8 Greenfield Investment

Greenfield Investment is an organic way of entering a market. The basic idea consists in setting up own facilities in the target market using own resources. The extent of this ground-up strategy can vary heavily. Depending on the resources available and the company‟s objectives, Greenfield investment can relate to a simple sales office or a completely autonomous subsidiary. Surely, the scope of the engagement determines the risks taken, the efforts necessary and the intensity of the investment.

Being in full control from the beginning is this strategy‟s major benefit. Choices regarding location, labour and strategy are up to the internationalising company. Additionally it is common for local government to sponsor such investments as jobs are created. Home country managers can still occupy key positions. Despite the use of own resources, the cost of achieving the objective are moderate and controllable as only the things needed are purchased contrarily to an acquisition. However, the company is likely to encounter legal and cultural barriers, as it cannot count on support by a local partner. Next, the initial investment into real estate and the facilities might be controllable but will still be significant before generating any returns. Moreover, it is the company‟s own task to hire workforce, establish distribution channels and establish its brand on the new market. Finally, depending on the extent of the Greenfield investment, the speed of achieving the objective is very slow requiring patience and stamina.¹⁸

Prudent Greenfield investments by football clubs can be the foundation of a representative office in the target market or opening own representative offices like e.g. VfL Wolfsburg did in Asia. More investment intensive on-site engagements can be the foundation of an affiliated club. Again, this investment intensive entry mode tends to be observed at investors like Red Bull GmbH founding the club Red Bull Brazil thereby adding an affiliated club to the Red Bull football network.

2.4 Influencing Factors

As indicated in paragraph 2.4 market entry strategies come along with individual limitations and benefits. In order to judge about a strategy‟s feasibility and suitability multiple factors need to be taken into consideration. Especially factors influencing international strategies are very complex, interdependent points making it impossible to identify standard solutions for all internationalising companies. Therefore, every internationalisation process is a new individual way of entering a market. It is comparable but never identical to previous entries. Factors influencing the entrance into a foreign market can be divided into company-internal factors and external factors referring to the target market‟s circumstances.

2.4.1 Internal Factors

To be aware of one‟s own prerequisites is crucial for making the correct strategic decision. Firstly, the internationalisation‟s objective should be explicitly defined as well as its geographic extent. If long-term establishment in one pre-determined country is pursued, local FDI measures appear to be a reasonable choice. However, these will not be suitable if multiple countries which are geographically distanced are targeted. Next, measurable influences such as company size, availability of resources, financial means and the value chain‟s structure have to be considered. As illustrated in Figure 2 intensity of investments varies a lot depending on the strategy. Most commonly, SMEs are limited in resources as well as financial funds and therefore opt for ventures, alliances or even less risky entry modes. In addition, companies need to decide what parts of their value chain they plan to internationalise. Football clubs who are rich in resources can e.g. decide to internationalise talent scouting, training camps and merchandising activities at the same time whereas less funded clubs may decide to rely on less costly club partnerships as a start. Lastly, qualitative conditions need to be respected. These include the company‟s attitude towards international markets and the staff‟s willingness to participate in the transnational project. The responsible persons‟ knowledge on foreign markets like language skills and cultural openness can turn out to be a benefit as well. Additionally, clear distribution of power is necessary to avoid conflicts in later stages of the internationalisation process. For culturally open-minded clubs lacking knowledge in internationalisation, alliances and ventures are good ways to gather experiences on the new market. Experienced clubs who aim at adding an additional market to their international portfolio can opt for autonomous organisation and implementation of a strategy.¹⁹

2.4.2 External Factors

Influences on a company‟s choice of entry strategy into a market are referred to as external factors. Every host country and the targeted customer group have individual political, micro- and macroeconomic as well as sociocultural prerequisites. Correlations between a circumstance and the most suitable strategy are easy to identify. Usually, foreign companies avoid politically unstable or undemocratic countries. On the other hand, political support e.g. via subsidies and import regulations by a host country often invite companies to invest directly into the country. Of course, economic indexes like per capita income, GDP, purchasing power, unemployment rate, rate of inflation, exchange rate risk and many more influences are decisive. In order to be eligible for FDI, economies should be stable and carry low economic risks. If this is not the case, companies tend to enter the market by using less investment intensive strategies like exporting or franchising which allow to withdraw from a market quite rapidly in case of negative economic developments. The more apparent natural factors relate amongst others to geographic distances, accessibilities to resources and meteorological circumstances. Founding a subsidiary abroad is more favourable if the country is geographically close and accessible as the affiliate‟s development can be controlled easily. Moreover, very hot and humid regions are not suitable for valuable fragile equipment or physically demanding work. A host country‟s social and cultural structure will affect the decision process further. Demographic trends may reveal opportunities such as additional target groups. The population‟s affinity towards the product or service is crucial too. Therefore, football clubs tend to favour countries in which the sport‟s popularity is high.²⁰ Many additional sport-related influences have to be kept in mind for the choosing the best entry mode. Fans want the teams to be tangible making some kind of physical engagement into host countries inevitable. Next, clubs need to analyse the local competition and derive necessary measures to assure competitiveness. Competition origins from other international clubs who attract the population‟s interest just like the local national leagues do. If a nation is popular for being equipped with many young talented players, international clubs are more likely to enter partnerships and open talent schools.

Whatever strategy will be chosen eventually, internal and external factors always have to harmonise in order to take the best decision. The influences generally hold for all companies inter alia football clubs. Chapter 5 will use a practical example to weigh external factors against potential target markets.

3. Status Quo of Internationalisation in German Football

With the objective of attaining an overview about German football‟s current state regarding internationalisation, the involvement of the organizing football association as well as the clubs‟ individual engagement in international activities will be explained in this chapter. Additionally, the national league will be compared to other countries‟ football leagues. To complete this section, the choice of RasenBallsport Leipzig as exemplary object of this thesis will be clarified.

3.1 The role of the “DFL Deutsche Fußball Liga GmbH”

The DFL‟s mission mainly consists in organizing German professional football and its commercialisation. Lead by Christian Seifert, the association has multiple affiliated subsidiaries each responsible for distinct business areas. With its foundation in 2008, the DFL Sports Enterprises (DFL SE) became German club football‟s ambassador with respect to the internationalisation development. Separated into two segments, the DFL SE is responsible for the international marketing of the audio- visual rights as well as topics concerning digital content and licensing.²¹ Marketing TV rights to broadcasters across the globe is one of the subsidiary‟s most revenue- generating and most important tasks. Throughout the years, a constant growth in turnover from the international sales of TV rights was achieved.²²

At present, the Bundesliga is broadcast in 211 countries of which 210 show live content. An important change in marketing strategy enabled the DFL SE to switch from a territory-to-territory approach to selling the annual rights to pan-regional broadcasters like FOX or BeIN Sports supplying multiple countries with Bundesliga broadcasts at a time. Furthermore, the establishment of the DFL SE‟s Singapore office in 2012 allows since then to constantly keep in touch with the Asian market as well as to extend and cultivate the Bundesliga‟s brand on the spot. Additional to marketing the league‟s audio-visual content, the DFL SE introduced several marketing measures in order to popularise the Bundesliga abroad.²³ These include on- site events in the target market such as legends tours or public viewings as well as the continuous development of digital offers in social media, fantasy managers and websites in many languages. As of today, the digitalisation efforts attained 1.1 billion clicks.²⁴ Promoting political sport-related alliances between countries, as happened between the Chinese and German governments, are supplementing the marketing portfolio. Moreover, it is indispensable to point out the financial and organizational support by the DFL to Bundesliga clubs who plan promotional trips to official target markets such as e.g. the United States or Asia.²⁵ The positive image of the German national team worldwide due to its win of the world cup in 2014 combined with the national team‟s own internationalisation initiatives create additional opportunities for the clubs and also aides in facilitating their market entries.²⁶ In March 2017, the DFL CEO published the intentions of establishing a new subsidiary which is meant to bundle all sales and marketing efforts. Therefore, DFL SE is planned to be integrated into the new DFL International GmbH.²⁷

In a whole, the efforts of the DFL SE lead to a redistribution of worldwide generated 160 Million € to the Bundesliga clubs in the season of 2016/2017.²⁸ The amount will continue to increase and is expected to 250 Million € in the near future.²⁹ As a result of this positive development expert No.2 considers the DFL‟s work in regards to internationalisation as innovative and exemplary pointing out the high commitment as well as the permanent collaboration with the clubs.³⁰ At the same time, Christian Seifert emphasises that clubs must be aware of their duty to deliver a certain equivalent value in order to justify the increasing prices broadcasters are willing to pay.³¹ As the national market might soon be saturated, the demand for international TV rights - and consequently the expectations of international broadcasters to the clubs - becomes more important than ever.³² To Christian Seifert it is obvious that “football is part of the worldwide entertainment industry”³³, therefore he encourages all clubs to think beyond national borders in order to ensure further growth. To better understand the DFL‟s appeal, the clubs‟ individual involvement in internationalisation will be presented in the following section.

3.2 Comparison of Bundesliga teams’ Internationalisation processes

In order to provide an overview of the Bundesliga clubs‟ worldwide internationalisation activities the following paragraphs will list some of the most significant and important measures taken as of today. A summary of all individual measures taken by each club at this time will not be given as the majority of the measures have become common practice within the industry and to summarize all is beyond the scope of this work.

“Who wants to play with the big guys, needs to go into the world.” (Jörg Wacker, Head of Strategy and Internationalisation at FC Bayern Munich).³⁴

FC Bayern Munich‟s involvement abroad can be traced back to the year 2000 marking the club‟s first visit to China in the club‟s history. Since then, the club have increased its internationalisation process continuously. After 2015, the team will visit the world‟s most populous country for the sixth time in July 2017. Besides China, FC Bayern have travelled to Indonesia, India and lately to the United States. The internationalisation process is supported by an own office in New York and an additional office in Shanghai which opened in March 2017. According to the CEO Karl-Heinz Rummenigge having a permanent representation in a country will enhance the club‟s relationship to the currently up to 136 Million followers in the country.³⁵ Furthermore, an alliance with a local professional club in Thailand was established. Together, “FC Bayern Youth Cup 2017” will be organized and take place in Thailand. The cup is an annually held tournament for junior players, which was already held in India, Japan, China, Brazil and multiple other countries in the years before.³⁶ How serious the club are about internationalisation can be observed on its website and social media presence. The website is available in eight languages and the official Twitter-Account keeps the fans and followers up to date in five languages, including one special US and one normal English page. Due to these and many more measures, FC Bayern Munich are undisputedly the leading German football club concerning internationalisation. Nevertheless, the recently second most successful German football club from a sports-perspective, Borussia Dortmund, have been promoting its popularity abroad remarkably as well. Asia has been a popular destination for the club throughout the last decade. The team and club‟s ambassadors have visited Indonesia, Malaysia, Singapore, Japan and China mainly for promotional reasons. Especially in Japan and China, being the clubs latest destinations, Borussia Dortmund enjoy high reputation. Carsten Cramer, Director of Sales, Marketing and Business Development, explains the frequent visits to Asia as the club‟s response to the local fans‟ demand to literally be able to touch the players.³⁷ Borussia Dortmund‟s popularity was further increased by signing the Japanese player Shinji Kagawa in 2010 and again in 2014 after he spent two years at Manchester United in between. By opening a representative office in the Southeast Asian hub Singapore in 2014 the club aim at boosting the regional fan base and be more tangible to potential business partners. Also, with the support of sponsors collaborations with youth academies and clubs in Japan, Malaysia and Thailand have been established. The “Evonik Soccer School” which was launched in cooperation with the club‟s main sponsor Evonik, is a special marketing measure offering trainings to children. This is not only available nationally but BVB coaches and staff tour around the world to coach children including countries such as Singapore, Thailand and China.³⁸ To complete the club‟s portfolio of marketing measures abroad, Borussia Dortmund licensed special audio-visual content to national TV channels like the Thai broadcaster PPTV.³⁹

BVB‟s traditional rival FC Schalke 04 will organize a promotional trip to China in July 2017 for the second time in the club‟s history after a successful trip the previous year. The trip is complemented by the club‟s reputed football-school “Knappenschmiede”. The strategic alliance with the Chinese Jiansu province supports young talents by offering trainings led by special coaches sent from the German club.⁴⁰ The presence on the Asian market is complemented by providing a Japanese and Chinese version of the online shop and website. Due to the main Russian sponsor Gazprom, digital content in Russian is available as well. Additionally, the club decided to trust a local agency to further promote FC Schalke 04‟s internationalisation process on the US market.⁴¹ The practice of having a local agent to promote a club‟s image and brand can be observed in various cases.

Under the lead of J. Rotthaus Bayer 04 Leverkusen visited the United States in recent years. The concentration on the American market is due to the club‟s most popular player “Chicharito”. Bayer 04 use the Mexican‟s popularity amongst the Latin- American community in the United States to promote the club‟s brand. Moreover, Leverkusen benefit from the global popularity of its mother company Bayer AG. A comparably wide reach concerning its worldwide digital communication and interaction on social-media characterizes the club‟s efforts.⁴² Most recently, Bayer 04 signed a cooperation agreement with representatives from China to support the People‟s Republic‟s football by supporting youth development and women‟s football.⁴³

The Chinese market also attracts VfL Wolfsburg as the club‟s Youth Academy visited multiple cities in 2014 and the professional team spent a week in the country in 2016.⁴⁴ Also promoting the Volkswagen AG‟s marketing interests, the club find themself various additional sponsors and partners in East Asia. With the purpose of being constantly present and tangible to the Chinese market, VfL Wolfsburg inaugurated its first representative office abroad in Beijing in early 2017.⁴⁵

Despite limited sporting success, Eintracht Frankfurt decided this year‟s training camp to be hosted in the USA. Additionally, three test games against local American teams are planned.⁴⁶ The fact that Frankfurt‟s squad includes American and Mexican players had an influence on the club‟s choice of destination.

Besides the six clubs mentioned above the other twelve Bundesliga clubs lack intense internationalisation projects. Several attempted to internationalise in the past like e.g. TSG 1899 Hoffenheim. As a consequence, of Hoffenheim‟s sponsorship by “SAP”, TSG target the IT-country India. In cooperation with an Indian company the country‟s youth football shall be further developed.⁴⁷ However, the club‟s overall engagement in internationalisation is not on the same advanced level as it is for the previous mentioned clubs. International involvement on a similar level or lower can be observed at Hamburger SV, Borussia Mönchengladbach, SV Werder Bremen, 1.FC Köln, FSV Mainz 05, VfB Stuttgart and Hertha BSC. The majority of the clubs has connections to international markets via sponsors or occasional trips abroad. Nevertheless, these activities remain sporadic inconsistent measures which naturally are also due to limited resources and a number of other reasons. As of today, the clubs SC Freiburg, FC Augsburg, Hannover 96, RasenBallsport (RB) Leipzig, FC Ingolstadt and SV Darmstadt do not or very rarely pursue internationalisation efforts. Van Overloop classifies football clubs into three categories depending on their level of Internationalisation. Not-internationalised clubs are characterised by few available resources and rare internationalisation efforts resulting in anonymousness abroad. Passive-internationalising clubs engage more intensively abroad and can be described as followers or imitators. Despite limited resources these clubs benefit from moderate popularity due to their tradition and occasional sporting success in the past. Active- internationalising clubs are first movers, which are known for their regular outstanding sporting success. Moreover, these pioneers profit from good management structures and the sufficient resources.⁴⁸

In summer 2017, only four clubs will travel to non-European countries. The international abstinence of many clubs contradicts with the conviction of Expert N.1 explaining that the Bundesliga needs all eighteen clubs in order to be represented abroad. Because every club benefits from the league‟s international revenues, all clubs have a certain duty to contribute.⁴⁹

According to DFL SE, clubs often do not realise the necessity of internationalisation due to the high national revenues they receive by the healthy German economy. Nevertheless, DFL SE recommends every club to start undertaking more promotional activities. One measure in doing so would be for every club to start employing staff particularly responsible for Internationalisation.⁵⁰

3.3 German football in international comparison

The abstract‟s goal is to briefly outline the position of German football with respect to internationalisation compared to other national football organisations. This will allow judging on the DFL‟s and the clubs‟ achievements up to today and their future challenges.

When it comes to financial funds generated abroad, the English Premiere League is literally playing in a league of its own. By marketing the rights internationally, the Premiere league annually generates approximately 1.3 billion € (1.1 billion £) which is eight times the amount generated by the Bundesliga in 2016 (160 million €).⁵¹ This tremendous sum results from the English clubs‟ global popularity, especially in the core markets Asia and continental Europe. DFL SE names multiple reasons for the English clubs‟ great importance abroad. Among others, their internationalisation efforts are organised on the long-term. Benefiting from the first-mover advantage, the clubs were able to establish themselves abroad long before other leagues thought about internationalising. The earliest promotional visits to Asia were undertaken in 1980s and 1990s already. Additionally, cultural aspects from former British colonies created special bounds between international fans and the league. In addition, the ability to offer all content in the English language allows supporters to access daily information via the internet.⁵² Michael Schade, CEO of Bayer 04 Leverkusen, adds “the English are all on tour, whereas from us [German clubs] only a few are”.⁵³

Nevertheless, the Bundesliga accounts for the second highest overall income of the „big five‟ European leagues. Ahead of the Spanish „Primera Divisón‟, the Italian „Serie A‟ and the French „Ligue 1‟, the Bundesliga ranks on a competitive position on European level.⁵⁴ To promote their respective leagues in Asia, Primera Divisón and Ligue 1 are currently setting up representative offices in China. As presented in chapter 3.2, three German clubs run offices abroad. This method is becoming common practice within the industry as almost all big European clubs are represented similarly across the world, however to different extents. The varying dimensions can be illustrated with respect to the Leagues‟ and clubs‟ personnel outside of the country dealing with internationalisation and business development. Whereas Manchester United employ 25 people in its Hong Kong office only, the cumulated number of all employees abroad from DFL and the three German clubs reaches ten to fifteen.⁵⁵

Even though DFL SE, Expert No.1 and Expert No.2 agree that it will be impossible to recover the Premiere League‟s international advantage in the short run, their opinions comply that in the end the Bundesliga has the possibilities to catch up. Apart from the numbers, Expert No.1 explains that actually a financial comparison of clubs and leagues is not as relevant as one assumes. The ultimate goal of a club is to follow its own process and pursue sustainable growth. Remembering that football itself remains the core business it may not be important to catch up with the Premiere League‟s financial advantage. Taking into account sporting success, German clubs are ahead of English clubs despite their almost endless financial resources.⁵⁶ The UEFA five year ranking ranks countries according to their clubs‟ sporting achievements within the recent five years. Lead by Spain, Germany takes second place ahead of England, Italy and France.⁵⁷

[...]

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¹ Repucom (2014), P 6.

² See Rummenigge (URL1), translated from German: “alternativlos”.

³ Latdict (URL1)

⁴ Van Overloop, Hermanns (2009), P 362.

⁵ Van Overloop (2013), P 29.

⁶ European Commission (URL1)

⁷ Naldi and Kuiken (2016), P 31.

⁸ Van Overloop (2008), P 589-590.

⁹ Lymbersky (2008), P 71f.

¹⁰ Limbersky (2008), P 79f.

¹¹ Borussia Dortmund GmbH & Co. KGaA (URL1)

¹² Mc Donald‟s (URL1)

¹³ Limbersky (2008), P 115f.

¹⁴ Limbersky (2008), P 203f.

¹⁵ Limbersky (2008), P 178f.

¹⁶ Puck, Wirth (2007) P 7-8.

¹⁷ Limbersky (2008), P158-159.

¹⁸ Limbersky (2008), P 157-158.

¹⁹ Höft et al. (2005), P 163-164.

²⁰ Höft et al. (2005), P 163-164.

²¹ DFL Sports Enterprises GmbH (URL1)

²² The international marketing section of DFL Sports Enterprises was recently reorganised to Bundesliga International GmbH, a subsidiary founded by the DFL in April 2017.

²³ Interview DFL Sports Enterprises GmbH (2017)

²⁴ DFL Deutsche Fußball Liga GmbH (2017), P 23.

²⁵ Interview DFL Sports Enterprises GmbH (2017)

²⁶ Curtius (2017), P 84.

²⁷ DFL Deutsche Fußball Liga GmbH (URL1).

²⁸ Franzke (URL1)

²⁹ Seifert (2017), P 18.

³⁰ Expert No.2 (2017), P 3.

³¹ DFL Deutsche Fußball Liga GmbH (2017), P 7.

³² Seifert (2017), P 18.

³³ See Seifert (URL1), translated from German: „Fußball ist teil der weltweiten Unterhaltungsindustrie“.

³⁴ See Wacker (URL1), translated from German: “Wer mit den Großen mitspielen will, muss in die Welt”.

³⁵ Kicker (URL1)

³⁶ FC Bayern München AG (URL1)

³⁷ Borussia Dortmund GmbH & Co. KGaA (URL2)

³⁸ Borussia Dortmund GmbH & Co. KGaA (URL3)

³⁹ Borussia Dortmund GmbH & Co. KGaA (URL1)

⁴⁰ FC Gelsenkirchen-Schalke 04 e.V. (URL1)

⁴¹ FC Gelsenkirchen-Schalke 04 e.V. (URL2)

⁴² Rotthaus (URL1)

⁴³ Kicker (URL2)

⁴⁴ VfL Wolfsburg (URL1)

⁴⁵ VfL Wolfsburg (URL2)

⁴⁶ Eintracht Frankfurt (URL1)

⁴⁷ TSG 1899 Hoffenheim Fußball-Spielbetriebs GmbH (URL1)

⁴⁸ Van Overloop (2013),P 378.

⁴⁹ Interview Expert No.1 (2017)

⁵⁰ Interview DFL Sports Enterprises GmbH (2017)

⁵¹ Deloitte LLP (2016), P 7.

⁵² Interview DFL Sports Enterprises GmbH (2017)

⁵³ See Schade (URL1), translated from German: “Die Engländer sind alle auf Tour während es von uns nur ein paar sind“.

⁵⁴ Deloitte (2016), P 9.

⁵⁵ Interview DFL Sports Enterprises GmbH (2017)

⁵⁶ Interview Expert No.1 (2017)

⁵⁷ UEFA (URL1)