The internationalization of professional football clubs. Potential markets and the brand personality of Borussia Dortmund


Master's Thesis, 2020

81 Pages, Grade: 1,3


Excerpt

Table of Contents

Abstract

List of Figures

List of Tables

List of Abbreviations

List of Symbols

1. Introduction to the topic
1.1. Research subject and problem definition
1.2. Research questions and relevance
1.3. Research objectives and propositions
1.4. Conceptual structure and methodology

2. Conceptual demarcation and explanation of terms
2.1. Identity management of brands
2.1.1. Brand identity
2.1.2. Brand personality
2.2. Hofstede’s concept of culture

3. Professional football clubs as commercial enterprises
3.1. The core business and primarily business objectives
3.2. The main business segments of a professional football club
3.2.1. Matchday Revenues
3.2.2. Sponsoring
3.2.3. Merchandising
3.2.4. Media Rights

4. Motives and preconditions of internationalization
4.1. Strategic asset and resource seeking
4.2. Efficiency seeking
4.3. Follow-the-leader
4.4. Market seeking
4.5. Requirements and success factors of internationalization

5. The assessment of potential target markets
5.1. Research question and methodology
5.1.1. Methodology
5.1.2. The current state of research
5.2. Target group definition
5.3. Determining factors of the sports market
5.3.1. Multiple regression analysis
5.3.2. Prediction of potential market attractivity
5.3.3. Distance factor analysis – the CAGE distance framework
5.4. Managerial implications and research limitations

6. Empirical study ‘ The brand personality of Borussia Dortmund
6.1. Research question and methodology
6.1.1. Methodology
6.1.2. The current state of research
6.2. A brief outline of Borussia Dortmund
6.2.1. The brand identity of Borussia Dortmund
6.2.2. International activities of Borussia Dortmund
6.3. Data collection and random sample specification
6.4. Analysis of Borussia Dortmund’s intended brand identity
6.5. Hypotheses testing – the SCBPS of Borussia Dortmund
6.5.1. Descriptive statistics – SCBPS of Borussia Dortmund
6.5.2. Analysis-of-variances – SCBPS of Borussia Dortmund
6.5.3. Multivariate regression analysis – national deviations on the SCBPS
6.5.4. Multivariate regression analysis – the influence of culture on the SCBPS
6.6. Managerial implications and research limitation

7. Conclusion and Outlook

Publication bibliography

Appendix
1. The City Football Group corporate network
2. Nielsen Sports – Football’s biggest markets
3. Target group size ‘fan-based’ – complete list
4. Target group size ‘income-adjusted’ – complete list
5. Conditional prediction analysis
6. Random sample demographic structure

Abstract

The ongoing professionalization and commercialization of football, as the logical consequence of the constantly increasing financing need of today’s football clubs, constitutes a topic of high interest within the current media landscape and society. This phenomenon is especially valid for the leading clubs of the ‘big five’ European football leagues. Considering that further growth opportunities in their respective domestic, mainly saturated markets are limited, most of these clubs strengthened their efforts of expanding their business activities into new foreign markets in recent years. In this context, it seems that the assessment and selection of potential foreign markets are mainly based on the potential fanbase which causes a situation in which the internationalization path of leading European football clubs appears to be relatively similar and mapped out to a large degree. Due to this fact and the non-perceptibility of a systematical assessment and selection procedure, this thesis examined the attractivity of current and prospective markets by means of deductive analysis. The results confirmed the general assumption of the high importance of socio-economic conditions as a significant determining factor for assessing the attractivity of prospective new foreign markets. Based on these findings, the thesis provides a ranking of the top non-UEFA member markets which could demonstrate deviations between the actual target markets of European football clubs and the results of the ranking. Furthermore, as the internationalization of a professional football club implies also the extension of a club’s brand management and marketing activities, the thesis contains an empirical study on the perception of the brand ‘Borussia Dortmund’ within international markets. In accordance with global marketing literature which states that cultural differences have the potential to notably affect consumer perception of foreign brands, the study was able to confirm this assumption. The results based on the brand identity and personality of ‘Borussia Dortmund’ provided clear indications that deviations on the perception can be linked to and explained by cultural differences. Consequently, these findings could serve as the basis for possible adaptations on the brand identity for being able to exploit commercial potentials in new foreign markets in a more effective and efficient way.

List of Figures

Figure 1 European football market size – 2016/17 and 2017/18 (in bEuro)

Figure 2 Revenue structure of the ‘big five’ European football leagues – 2017/18 (in mEuro)

Figure 3 Basic brand identity concept

Figure 4 Aaker’s brand personality framework

Figure 5 Revenue of the ‘big five’ European football leagues from 1996/97 to 2019/20 (in mEuro)

Figure 6 Hyperactivity portrayed as an oversimplified ‘value cycle’

Figure 7 Revenue breakdown of the ‘big five’ European football leagues 2013/14 and 2017/18

Figure 8 Activation and monetarization of the fans – merchandise (left)

Figure 9 Merchandising revenues of the Bundesliga seasons 2013/14 to 2017/18 (in mEUR) (right)

Figure 10 Media rights revenue of the ‘big five’ European football leagues – 2012/13 and 2017/18

Figure 11 The five most relevant alternative motives for internationalization

Figure 12 Value-creation cycle in sports

Figure 13 What does the global fan look like?

Figure 14 Target group size ‘fan-based’ – top 10

Figure 15 Target group size ‘income-adjusted’ – top 10 (in Euro)

Figure 16 Determinants of the sports market

Figure 17 Top non-UEFA member markets (displayed green/bold) measured by FMAIndex

Figure 18 Top 15 clubs | operating revenues (except transfer fees) and UEFA club coefficient 2018/19

Figure 19 Brand steering wheel of Borussia Dortmund (left)

Figure 20 Brand value of Borussia Dortmund (right) 2011 - 2018 (in mUSD)

Figure 21 Borussia Dortmund revenues by segment from 2014/15 to 2018/19 (in mEuro)

Figure 22 Perception of Borussia Dortmund’s brand identity attributes (left)

Figure 23 Spontaneous associations with Borussia Dortmund (right)

Figure 24 The corporate network of the City Football Group

Figure 25 Selected markets ranked by percentage of the population interested in football

Figure 26 Random sample demographic structure

List of Tables

Table 1 OLS regression results | Backward elimination | Dependent variable: sports market

Table 2 OLS regression results | Forward selection | Dependent variable: sports market

Table 3 Conditional prediction analysis (extract) | Dependent variable: sports market | FMAIndex

Table 4 OLS regression results | Cultural distance | Dependent variable: import share

Table 5 OLS regression results | Administrative distance | Dependent variable: import share

Table 6 OLS regression results | Geographic distance | Dependent variable: import share

Table 7 OLS regression results | Economic distance | Dependent variable: import share

Table 8 Extract of the demographic data people evaluated

Table 9 Means, standard deviations, correlations ‘BVB brand identity’

Table 10 Means, standard deviations, correlations SCBPS

Table 11 Means, standard deviations, correlations independent variables

Table 12 Analysis of variance ‘brand personality’ attributes

Table 13 WLS regression results SCBPS attributes and nationalities

Table 14 Hofstede’s cultural dimension scores and cultural distances

Table 15 WLS regression results ‘SCBPS’ attributes and culture

Table 16 Market potential ‘fan-based’ xx

Table 17 Target group size ‘income-adjusted’ (in Euro) xx

Table 18 Conditional prediction analysis | Dependent variable: sports market | FMAIndex xxi

List of Abbreviations

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List of Symbols

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1. Introduction to the topic

Football – or ‘soccer’ in some parts of the world – is, with a fanbase of around 4,000m people, the undisputed № 1 sport in the world, followed next by cricket with 2,500m (Sawe 2018). “Top level football has continued to evolve as an industry that attracts and creates wealth while remaining the most captivating spectator sport. In many ways, football epitomises the concept of globalisation and has become a universal language that can be easily understood the world over” (SOCCEREX 2019, p. 3). Although football, in general, has become a worldwide phenomenon and the football industry as such a globe-spanning network, the nucleus consists of the ‘big five” European leagues. The top divisions of England, Germany, Spain, Italy and France are the worldwide leading football associations with aggregated revenues of 15.6 bEuro in 2018 and thus, accountable for 54.9% of the revenue streams of all 55 UEFA member associations combined [see Figure 1] (Deloitte 2019c, p. 8; Maderer 2015, p. 1). This fact gets also supported by the findings of the Soccerex Football Finance 100 (FF100), representing an “analytical model to evaluate the financial strength of football clubs” (SOCCEREX 2019, p. 6), “Europe […] continues to dominate the FF100 […] [building an] overall [stake of] 59% of the FF100 clubs” (SOCCEREX 2019, p. 4). Only considering the top 25 clubs, the dominance is even more prominent. Within this ranking 21 of the 25 clubs are members of the ‘big five’ European football leagues, completed by two clubs from the United States and respectively one club from China and Ukraine (SOCCEREX 2019, p. 7). Due to the progressing professionalization and commercialization, football nowadays is not only a sport inspiring billions of spectators all over the world but also a major industry on a continuous growth track. “For the third consecutive year, the overall [enterprise value] of the 32 most prominent European football clubs has increased by 9% (an impressive 35% over the past three years). This growth rate is in contrast with the overall trend of major European Stock Exchanges, notably the STOXX Europe 50 Index, showing a year-on-year decrease of -13% (-9% from 2016), and demonstrating the different pace at which the football industry is evolving” (KPMG Advisory Ltd. 2019, p. 4).

Figure 1 European football market size – 2016/17 and 2017/18 (in bEuro)

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Source: adapted from Deloitte (2019c, p. 8)

Besides the sporting competition on the pitch, ‘the pure nature of the game’, a club’s ability to compete gets already predetermined by its financial strength. Although, forming a squad consisting of the best players and coaches has always been the best precondition for sporting success (KPMG Advisory Ltd. 2019, p. 20), the financial expenses, especially salaries and transfer fees, have increased massively in recent years. While the transfer fee of the Brazilian player Ronaldo, at this time the FIFA World Player of the Year, in 1996 from PSV Eindhoven to the FC Barcelona accounted for 15.0 mEuro (transfermarkt 2019b, 2019c), the today's average market value of a Barcelona player already amounts to 48.3 mEuro, with a rising tendency (KPMG Advisory Ltd. 2019, p. 23). Within the last decade, the total turnovers of the ‘big five’ European football leagues have more than doubled, from 8.4 bEuro in the years 2009/10 to 17.0 bEuro at the end of the season 2018/19 (Deloitte 2019a). “However, their domestic markets are becoming more and more saturated, as almost all market shares are distributed among local clubs” (Maderer 2015, p. 1), which causes the need for further expansion into new foreign markets.

The first association strategically fostering its international presence was the English Premier League back in the year 2008. In the course of the so-called ‘39th Game’ proposal, the association and its clubs decided to hold parts of their pre-season overseas as well as “competitive matches in five cities across the world from 2011” (Rookwood and Chan 2011, p. 900). Although the plans have not only caused massive negative reactions of their domestic supporters but also controversies between several football authorities of other associations, the strategy resulted in a constantly growing global audience for the Premier League and the development of new broadcasting arrangements especially in Asia and North America (Rookwood and Chan 2011, pp. 899 f.). Finally, this pioneering development helped the Premier League to strengthen its already leading position within the ‘big five’ in the following years. Compared to the financial year 2008/09, with an advance of 751 mEuro in revenue over the first follower, the financial gap till the end of the financial year 2017/18 between the Premier League and the German Bundesliga, which ranked second, increased to 2,272 mEuro (Deloitte 2019a). Predominantly responsible for this huge competitive advantage are the international broadcasting revenues and partly also the sponsorship and commercial pay-outs of the Premier League compared to its closest rivals [see Figure 2].

Figure 2 Revenue structure of the ‘ big five ’ European football leagues – 2017/18 (in mEuro)

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Sources: adapted from Deloitte (2019c, p. 9), Rehm (2018)

Even if the financial gap between the Premier League and all other leagues might not affect the competition between local clubs within their respective leagues, transnational contests, namely the UEFA Europa and Champions League in which the top clubs of every European league compete against each other, are getting increasingly affected (UEFA 2019c, 2019d). As it is the ‘nature of the game’, every football club has the primary goal to achieve the greatest possible sporting success and, by this, to inspire its spectators. Consequently, “football’s administrators are constantly looking at ways to further leverage its vast audience to improve relevance [sic] and commercial opportunity” (SOCCEREX 2019, p. 3) to strengthen their clubs’ financial resources and increase the likelihood for achieving their sporting objectives.

1.1. Research subject and problem definition

In contrast to classic manufacturing companies or service firms, professional football clubs lack most of the generic growth strategy options like a product diversification as their business model relays mainly on ‘one product’, the actual game of football (Graf von Pueckler 2015, p. iii). On this account and considering that further growth opportunities in their respective domestic, mainly saturated markets are limited, this thesis will take a closer look on the current situation of professional football clubs regarding potential opportunities as well as restrictions for expanding their business activities into new foreign markets. “While current research in the area of sport management identifies brand associations as important for the management of sport clubs” (Maderer 2015, p. 3), possible implications on internationalization strategies are still lacking. Managing directors of professional football clubs nowadays “have to think and act globally” (Maderer 2015, p. 3). This includes the assessment of new potential target markets as well as strategies of entering and development (Maderer 2015, pp. 3 f.).

As a consequence of this constant transition from a local orientation to a global approach, they find themselves in the “tension between the advantages of global integration on the one hand, and the need for local responsiveness and differentiation on the other hand” (Maderer and Holtbrügge 2018, p. 411). This conceptual dilemma, shown by Prahalad and Doz (1987) and often referred to in global marketing literature, is especially applicable to a football club’s identity management of its brand. Even though the extension of their business activities into new foreign markets might be mandatory from an economic perspective, football clubs must respect the brand’s local heritage as it serves as the backbone of their corporate identity (Maderer and Holtbrügge 2018, pp. 411 f.).

1.2. Research questions and relevance

Referring to several statements of leading football club officials, the assessment and selection of potential foreign markets are based on a few, mainly socio-demographic, variables (Koers 2017). Even Nielsen Sports (2018c), one of the leading market researchers, which concludes that “the U.S., Mexico, Russia, China and India represent some of the most interesting growth markets for football” (Nielsen Sports 2018c, p. 10), only provides a market evaluation based on the potential fanbase within those markets (Nielsen Sports 2018c, pp. 10 ff.). Consequently, the assessment and selection and therefore, the internationalization path of the leading European football clubs appear to be relatively similar and mapped out to a large degree (Werner 2017). Due to the non-perceptibility of a systematical assessment and selection procedure (Huth et al. 2018, p. 38), the first guiding question of this thesis states as follows: a. Which determining factors must be examined to get a valid market potential of a prospective new foreign market, particularly considering possible impacts occurring from distance factors such as cultural and economic differences? As already mentioned, the internationalization of a professional football club implies also the extension of a club’s brand management and marketing activities. According to global marketing literature, cultural differences can also have an impact on the perception of a brand, leading to a deviating assessment within an international context compared to its intended positioning (Foscht et al. 2008, p. 131). Therefore, ignoring cultural distances and potential effects on the perception and assessment and as a consequence, the acceptance of its brand in an international market could harm the prospects of success of a football club’s internationalization strategy (Ghemawat 2018, pp. 33 ff.). Unfortunately, “there is no single blueprint companies can follow when taking a brand global” (Mooij 2014, p. 27). In this context and referring to the importance of a football club’s brand, the following guiding questions will be also examined in the course of this thesis: b. Are the mainly historical and local grown values, forming the identity and personality of a football club and its brand, in general, transferable into international markets? And more specific, do recipients, according to their cultural background, perceive and assess a football club’s brand differently compared to the perception and assessment within its domestic market?

1.3. Research objectives and propositions

The first aim of this thesis is to demonstrate that, using an adjusted market analysis approach, not only considering socio-demographic conditions of potential target markets, could lead to a shift in the assessment of current as well as prospective foreign markets. Therefore, several determining and influencing factors must be deducted to build a market potential evaluation model for professional football clubs. Hence, the first hypothesis suggests that:

H1 Using an adjusted market potential evaluation model, considering heterogeneous socio-economic market conditions as well as distance factors, can lead to a shift in assessing the attractiveness of international markets given the perspective of a professional football club.

The second aim of this thesis is to identify deviations in the perception and assessment of a football club’s brand within an international context compared to its intended positioning within the domestic market. This leads to the following hypothesis:

H2 The perception of a football club’s brand differs within an international context compared to its domestic market.

In this context, if deviations could be identified, the third hypothesis is going to be tested to provide a possible explanation for these deviations:

H3 There is a relation between cultural differences, related to the domestic market’s culture, and deviations on the perception of a football club’s brand within an international context.

1.4. Conceptual structure and methodology

To answer these research questions, this thesis is divided into seven sections. The first section provides a general introduction to the topic including a presentation of the problem and a derivation of the underlying guiding questions as well as a representation of the relevance and research objectives.

The second section is dedicated to additional explanations of general terms this thesis refers to. These include the demarcation between the concepts of brand identity respectively brand personality and a brief introduction to the concept of culture and the theory of Hofstede’s six cultural dimensions.

The main part of the thesis starts with section three providing further information about professional football clubs or more specifically, commercial football enterprises and their particularities compared to ‘regular’ private-sector enterprises for building up a common understanding. This includes a description of a professional football club’s core business and primarily business objectives as well as a brief outline of its main business segments. Section four will link these findings to selected motives and preconditions of a professional football club’s internationalization strategy, closing with some basic requirements and success factors. Both sections are based on a literature review on common sports management and sports economics literature, as well as current publicly accessible publications including industry reports, academic papers and articles of professional journals.

Sections five and six constitute the analytical part of this thesis and are directly addressed to the underlying research questions. Section five is related to the guiding question (a) respectively hypothesis H1. On this account, multivariate regression analyses will be presented to identify significant determining and influencing factors of the sports market. Subsequently, the results will be used for a prediction regarding the attractivity of current and prospective markets. The second analytical part, section six, is related to the guiding question (b) and hypotheses H2 and H3. It consists of an empirical study on the brand identity and brand personality of the German football club Borussia Dortmund. Borussia Dortmund was chosen for the analysis because the club already executes an internationalization strategy including several activities within international markets. After an introduction of the random sample data and a brief outline of the club, again the results based on a multivariate regression model will be presented and interpreted. Both sections will include a reminder on its respective aim as well as a more detailed outline of its respective underlying methodology. In addition, each section will start with a presentation regarding the current state of research and close by providing a brief statement regarding the respective managerial implications and research limitations.

Section seven will conclude the thesis by summarizing the primary findings and implications regarding a professional football club’s internationalization strategy including suggestions for further research.

2. Conceptual demarcation and explanation of terms

First, for building up a common understanding and to avoid possible misunderstandings, the following section will provide some additional explanations of general terms and concepts this thesis refers to.

2.1. Identity management of brands

Within present marketing and brand management literature, there are multiple definitions and explanations of ‘what makes a brand’ existent. Referring to Chernatony and Dall'Olmo Riley (1998) who analysed the broad range of existing definitions, they identified twelve main themes categorising the functions and usage of brands. Thus, ‘a brand’ can be described “as: i) legal instrument; ii) logo; iii) company; iv) shorthand; v) risk reducer; vi) identity system; vii) image in consumers' minds; viii) value system; ix) personality; x) relationship; xi) adding value; and xii) evolving entity” (Chernatony and Dall'Olmo Riley 1998, p. 418). Hence, it can be assumed that in practice the respectively applied definition relies on the actual aim of the brand owner or function and characteristic of the particular product or service. Therefore, within the context of professional football clubs, this thesis follows those definitions related to emotional rather than functional purposes. Thus, David Ogilvy, for instance, described a brand simply as “the consumer’s idea of a product” (Ogilvy 1951), while Franz-Rudolf Esch took this idea and added a broad functional component by stating that “brands are mental pictures in the consumers' minds that take on an identification as well as differentiation function and shape consumers’ behaviour” (Esch 2014, p. 22).

2.1.1. Brand identity

For being able to create these mental pictures in consumers’ minds, brand owners first have to lay “the basis that can provoke the applicant’s emotion and identification“ (Nufer et al. 2017, p. 321). By means of identity brand management, described as “a process of internal and external management for cross-functional sharing of all decisions and measures taken to develop a strong brand identity” (Meffert and Burmann 2002, p. 30), a bundle of intended mental and functional associations, representing the subjective image of the brand, has to be defined (Esch and Langner 2019, pp. 179 f.).

Figure 3 Basic brand identity concept

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While there are several sophisticated concepts and theories related to the evolution and management of a brand identity existing in practice, see for instance the brand identity prism of Kapferer (2012, pp. 158 ff.) or the brand steering wheel concept of Esch (2014, pp. 102 ff.), for this thesis, a basic differentiation between brand identity and brand image will be sufficient [see Figure 3]. Therefore, in the course of this thesis, brand identity is defined as the internal self-image, reflecting the sum of intended characteristics assigned to a brand to give it its absolute specificity helping to build brand awareness1 (Nufer et al. 2017, p. 321). The brand image, on the other hand, simply reflects the perceived characteristics assigned to a brand by its external target groups. Therefore, the brand image serves as the basis for evaluating the level of effectiveness of the brand strategy by measuring the fit of intended and actual brand traits and characteristics (Esch and Langner 2019, pp. 180 f.).

2.1.2. Brand personality

The brand personality not only serves as the basis for some general definitions of a brand but also reflects a sub-dimension within many brand identity concepts (Kapferer 2012, p. 158; Radtke 2014, p. 20). The basic idea is that “through consumer experience or marketing activities, brands may take on personality traits and human values and, like a person, appear to be modern, old-fashioned, lively, or exotic” (Keller and Swaminathan 2020, p. 114).

One of the most prominent concepts in this research field, and also the underlying theory for the ‘Sport Club Brand Personality Scale’, which will be introduced in the course of this thesis, are the five dimensions of brand personality based on the research of Jennifer Aaker (1997). Aaker defined a set of human characteristics, “based on an extensive data collection of ratings on 114 personality traits on 37 brands in various product categories by more than 600 individuals representative of the U.S. population” (Keller and Swaminathan 2020, p. 371) [see Figure 4].

Figure 4 Aaker ’ s brand personality framework

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2.2. Hofstede ’ s concept of culture

According to the previous paragraphs, a strong brand identity, as well as a high degree of consistency between the intended brand identity and the actual perceived brand image, constitute the basis of successful identity management of brands. Although this circumstance alone can be quite challenging due to heterogeneous consumer preferences even in domestic markets, within an international context, this gets further impeded caused by differences regarding the target group’s cultural background (Mooij 2014, pp. 47 f.). Culture as such can be defined as a “set of attitudes, beliefs, behavioural conventions, and basic assumptions and values that are shared by a group of people, and influence each member’s behaviour and each member’s interpretations” (Spencer-Oatey 2002, p. 4). In addition, according to Mooij (2014), “the way people think and perceive is guided by the framework of their own culture. […] Across cultures, consumers have different values and personalities, and they decide themselves which values they derive from the use of a brand” (Mooij 2014, pp. 3, 48).

One of the best-known researches in the field of measuring and comparing cultures was made by Hofstede et al. (2010). Hofstede and his colleagues finally established a full dataset of 65 countries and partial data of additional 46 and ranked them on six cultural dimensions (Hofstede and Hofstede 2015). By allocating an individual score to each of these countries on every dimension, the researchers developed a tool which made it possible to quantify culture and to determine a country’s relative position compared to another country’s culture (Hofstede 2011, p. 7). Since one aim of this thesis is to examine and explain deviations by means of cultural differences, the following paragraphs will provide a brief introduction to Hofstede’s general concept of cultural dimensions, on which the investigations are based. These six cultural dimensions are:

Power distance (pdi); defined as “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally” (Hofstede et al. 2010, p. 61). Possible implications regarding brand preferences are “that in high power distance cultures, being the ‘number one’ brand is important” (Mooij 2014, p. 93), whereas low power distance cultures tend to favour challengers following a ‘we try harder’ approach (Mooij 2014, p. 93).

Individualism versus collectivism (idv); consisting of two opposite poles, which are defined as follows: “Individualism pertains to societies in which the ties between individuals are loose; everyone is expected to look after him- or herself and his or her immediate family. Collectivism as its opposite pertains to societies in which people from birth onwards are integrated into strong, cohesive in-groups, which throughout people’s lifetime continue to protect them in exchange for unquestioning loyalty” (Hofstede et al. 2010, p. 92). These opposites can be also linked to the perception of brands. Whereas individualistic cultures “tend to see brands as unique human personalities” (Mooij 2014, p. 91), collectivist cultures have the tendency to build up a relationship with the respective company and “are more interested in concrete product features than in abstract brands” (Mooij 2014, p. 91).

Masculinity versus femininity (mas); the second dimension consisting of two opposite poles. A culture is masculine “when emotional gender roles are clearly distinct: men are supposed to be assertive, tough, and focused on material success, whereas women are supposed to be more modest, tender, and concerned with the quality of life. [On the opposite pole, a culture is considered] feminine when emotional gender roles overlap: both men and women are supposed to be modest, tender, and concerned with the quality of life” (Hofstede et al. 2010, p. 140). Regarding preferred brand characteristics, this dimension reflects similar tendencies already mentioned in terms of the power distance dimension, where masculine cultures put more focus on performance and feminine culture value modesty (Mooij 2014, p. 98).

Uncertainty avoidance (uai); “defined as the extent to which the members of a culture feel threatened by ambiguous or unknown situations” (Hofstede et al. 2010, p. 191). High scoring cultures show the tendency for formalization, well-defined processes and control measures (Hofstede et al. 2010, pp. 209 ff.). Besides a high correlation between cultures scoring high on uncertainty avoidance and “the percentage of people who say they never play sports (Mooij 2014, p. 101), expedient derivatives regarding their respective brand preferences could not be identified so far.

Long-term versus short-term orientation (lto); “Long-term orientation stands for the fostering of virtues oriented towards future rewards – in particular, perseverance and thrift. Its opposite pole, short-term orientation, stands for the fostering of virtues related to the past and present – in particular, respect for tradition, preservation of ‘face’, and fulfilling social obligations” (Hofstede et al. 2010, p. 239). Paradoxically, although long-term oriented cultures also value tradition as important, these cultures reflect the tendency to be more open for innovations as well as new products and brands compared to short-term cultures (Mooij 2014, p. 96).

Indulgence versus restraint (ivr); “Indulgence stands for a tendency to allow relatively free gratification of basic and natural human desires related to enjoying life and having fun. Its opposite pole, restraint, reflects a conviction that such gratification needs to be curbed and regulated by strict social norms” (Hofstede et al. 2010, p. 281). Regarding possible consequences for the perception and acceptance of brands, this dimension could provide important information when introducing a new brand into a foreign market. For instance, while cultures on the indulgent pole might perceive the brand as happy, inviting and stimulating, more restraint scoring cultures could see it completely different. If they are not familiar with it, they will probably perceive the brand as strange or even repulsive (Hofstede et al. 2010, pp. 294 ff.).

Finally, it must be mentioned that these explanations only reflect a brief extract of Hofstede’s concept of culture as a more comprehensive description, also regarding potential derivations and consequences of cultural differences on the perception and assessment of brands, would go beyond the scope of this thesis. Further information can be found, for instance, within the work of Hofstede et al. (2010) or Mooij (2014).

3. Professional football clubs as commercial enterprises

The professionalization and commercialization of football have changed the structures and character of its clubs over recent decades. The former non-commercial associations mainly developed to private- sector enterprises with organizational structures, employment rates and revenues on a level of common small and medium-sized2 or even larger enterprises (van Overloop 2015, p. 56 f.). The ‘big five’ European football leagues grew by 8.1% CAGR between the seasons 1996/97, with aggregated revenues of 2,497 mEuro, to 17,950 mEuro prospected till the end of season 2019/20 – without even one year of stagnation [see Figure 5] (Deloitte 2019a).

Figure 5 Revenue of the ‘ big five ’ European football leagues from 1996/97 to 2019/20 (in mEuro)

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Source: adapted from Deloitte (2019a)

This continuing general evolution gets also confirmed by the 36 clubs of the 1st and 2nd German Bundesliga. Between the years 2005 and 2018 the clubs increased their number of employees in total by 59.9%, from 31,056 up to 55,142, and their tax burden went up from 379.3 mEuro to 1,281.0 mEuro, which represents an overall growth of 337.7%. Thus, the football business and its clubs nowadays constitute an important business sector with an even rising tendency (Behrenbeck et al. 2015, pp. 9 ff.; DFL 2019, p. 21). Even though professional football clubs have evolved into commercial (football) enterprises, there are some particularities which will be illustrated in the following sections.

3.1. The core business and primarily business objectives

Football clubs’ corporate purpose consists of achieving the greatest possible sporting success. The basic requirement for being able to compete is to co-operate with rival clubs by building up a system in which the sporting competition can take place. This simultaneous existence of co-operation in planning, organizing and implementing a system of rules and regulations, and at the same time, the competition for sporting and also economic success is termed ‘co-opetition’. Consequently, this co-opetition causes conflicting interests of, on the one hand, an adequate allocation of revenues to enable and maintain the competition and, on the other hand, the vested interest of maximizing one’s club share of these revenues (Horch et al. 2014, p. 82 f., 100; Woratschek 2004, p. 9 f.).

As already mentioned, in contrast to classic manufacturing or service companies, football clubs lack most of the generic policy options to diversify their businesses and by this, to reduce the economic uncertainty (Graf von Pueckler 2015, p. iii). Each of their strategic business areas’ revenue streams, which will be discussed in the following section, is to a predominant part reliant on a club’s current level of sporting performance. These interrelated dependencies between economic rewards and sporting success, e.g. prize-money or sponsorship earnings-related on a club’s league position, which is the result of the relative squad strength compared to rival clubs, causes a situation stated ‘hyperactivity’ (Horch et al. 2014, p. 86). This situation, also referred to as “The Rat Race” (Akerlof 1976, p. 603), creates „incentives for overinvestments in a club’s squad strength, as the reduction would lead to lower sporting prospects of success and by this, to declining revenues“ (van Overloop 2015, p. 77). This makes players the most important production factor of football enterprises. Therefore, clubs have to take major financial expenses to hire talents and by this, enhance the probability of sporting success, which is the main precondition for a prospective amortization of preceding investments [see Figure 6] (Horch et al. 2014, p. 95, 100 f.; van Overloop 2015, p. 36).

Figure 6 Hyperactivity portrayed as an oversimplified ‘ value cycle ’

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Source: adapted from Horch et al. (2014, p. 86)

In the season 2017/18, the personnel cost ratio of the ‘big five’ European football league clubs ranged between 52.8% in the German Bundesliga and 74.6% in the French Lique1 (Deloitte 2019a, p. 11). For comparison only, the personnel cost ratio of the Adidas group in 2018, as an example for a ‘regular’ commercial enterprise, amounted to only 11.3% (adidas 2019, p. 87). By reason of the reciprocal linkages between economic and sporting decisions, and the uncertainty of the result as a general trait of sports, managing a football club constantly occurs within a climate of latent insecurity. Due to this fact, and in combination with the core product’s implied ‘predisposition-to-disappointment’, adding an emotional component to the business, long-term strategic planning and managing get significantly impeded (van Overloop 2015, p. 39 ff.).

Although sporting objectives are of the highest priority and the economic environment is mainly volatile, professional football clubs, like ‘regular’ commercial enterprises, pursue ‘regular’ economic objectives. Financial stability, as the underlying precondition for ensuring long-term existence of businesses in general, is not only obligatory for football enterprises but also essential for the licensing procedure to get the approval to even participate within the league competition (DFL 2020b; FIFA 2018, p. 10 ff.; van Overloop 2015, p. 81). As already stated by Sloane (1971) “the football club is seen to differ from the normal business enterprise” (Sloane 1971, p. 145). Unlike regular commercial enterprises which, in accordance to classical economic theory strive to maximize profits, football clubs’ approach, in general, seems to follow the concept of utility-maximization, e.g. building up prestige by winning championships (Horch et al. 2014, p. 85 f.; Mankiw and Taylor 2018, pp. 145 ff., 316 ff.). Even though the maximization of a club’s revenues is directly linked to the maximization of sporting success and therefore, of course of high importance, the assumption, in general, cannot be rejected.3 A key element is the usage of those financial resources. While a profit-maximizing club would pay out dividends and try to increase the shareholder value, utility- or ‘win-maximizing’ clubs, on the contrary, re-invest most of their earnings. An investigation on the financial situation of European football clubs by Solberg and Haugen (2010) has also proven that “European football clubs are [mainly] win maximizers” (Solberg and Haugen 2010, p. 329). The researchers examined the ratio between additional revenues, as a result of additional sporting success, and the added wages clubs had to invest in. The study showed that most clubs “will improve its sporting performance by hiring more talent” (Solberg and Haugen 2010, p. 332), even though the marginal utility is diminishing (Horch et al. 2014, p. 85; Solberg and Haugen 2010, p. 332 f.). The study explains the dilemma4 of this ‘win-maximizing’ approach, ending up in a situation of systematically overpaid talents. The result also reflects the high personnel cost ratios of European football clubs already mentioned, leading to a constantly increasing financing need to ensure financial stability and causing the rising tendency of commercialization (Solberg and Haugen 2010, p. 334 ff.).

3.2. The main business segments of a professional football club

Although the financial needs, and consequently the overall revenues of professional football clubs constantly increased over recent decades, their main business segments basically remained the same. As it has been mentioned in the previous section that revenues are reliant on the sporting success, the main business segments are concerned with commercializing a club’s activities and performance on the market for ‘passive sport consumption’ as well as its downstream markets (Behrenbeck et al. 2015, pp. 6 f.; Hermanns and Riedmüller 2008, pp. 42 ff., 60 ff.). During the past five years, the ‘big five’ European football league clubs achieved to increase the related revenues by 4.3 bEuro [see Figure 7].

Figure 7 Revenue breakdown of the ‘ big five ’ European football leagues 2013/14 and 2017/18 (in mEuro)

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Sources: adapted from Deloitte (2015, pp. 8 ff.), Deloitte (2019c, p. 9), own representation

The main growth is represented by earnings in conjunction with broadcasting, with a predominant share of 64.8%, followed by commercial revenues, mainly consisting of the sponsoring and merchandising segment, growing by 28.0%. Matchday revenues accounted for only 7.3% of the overall growth (Deloitte 2015, pp. 8 ff., 2019c, p. 9). In addition to these four primary business segments, revenues originating from transfer fees, as the fifth segment, can also amount to a significant part of the aggregated turnover. In the season 2017/18, for instance, the transfer segment of the German Bundesliga was accountable for 16.9% of the overall earnings of 3,814 mEuro (DFL 2019, p. 11). But due to the fact, that this segment is considered a ‘special form of financing’ since it is the result of an extraordinary equity release, it is not part of the ordinary business activities of a football enterprise (van Overloop 2015, p. 88).

The following sections will specify these four ordinary business segments, including an assessment of future development potentials and an integration into the international context respectively a professional football club’s internationalization strategy.

3.2.1. Matchday Revenues

Matchday revenues represent the aggregated earnings linked to the actual sporting event received by the organizing club. This includes especially gate revenues via one-day and season tickets as well as catering services for the spectators. In addition, most of the professional first league clubs record an increasing share of hospitality services, consisting of sophisticated gastronomic offers in separated areas of their stadiums. These relatively valuable services are mainly booked by business customers, who, for instance, in turn, invite their business partners or employees, as an extra corporate benefit (Schilhaneck 2008, p. 223; Teichmann 2007, pp. 96 ff.).

Due to the fact, that the supply of the segment matchday revenues is limited as the capacity of a club’s stadium is fixed, growth opportunities are “the lowest across all segments” (PWC 2011, p. 14). They consist mainly of two options, the complete utilization of their stadium capacity and raising fees (Daumann 2019, pp. 247 f.). Regarding the ‘big five’ European football leagues, only the Spanish LaLiga, the French Ligue1 and the Italian Serie A, with average utilization of 71%, 68% and 62%, still have got significant potentials left. The English Premier League as well as the German Bundesliga, which already achieved an occupancy rate of 95% respectively 91%, nearly exhausted their potentials (FIGC and PWC 2019, p. 142). Price increases are only possible on an incremental basis, as they possess structural market limits (Daumann 2019, pp. 99 ff.; Huth et al. 2018, p. 34). Spectators as such act as ‘co-creators of value’, meaning, they are not only consumers but also a critical factor for the atmosphere which is of high importance for the whole selling proposition of a stadium visit (Daumann and Römmelt 2015, p. 44). Therefore, an abrupt and strong increase in prices could lead to frustration and rejection, and consequently, a declining utilization or a change of the spectators’ structure, bearing the risk of a diluted atmosphere. On this account, most clubs use this leverage rather gradual (Steding 2014; Welt 2019).

Although the place of performance cannot simply be transferred into foreign markets, as it is determined by the national or regional competition regulations, further growth potentials within this segment also lie in a club’s internationalization strategy. By playing paid friendly matches in foreign countries, especially within the pre-season, clubs can generate supplementary matchday revenues (Borussia Dortmund 2019a, p. 126). In addition, the local presence in foreign markets enhances the level of awareness, a crucial success factor supporting the other business segments.

3.2.2. Sponsoring

The business segment sponsoring operates on the ‘quid pro quo’ principle. From the perspective of a club as the sponsored party, it consists of granting particular (communication-) rights, for instance, the sponsor logo printed on the club’s jersey during an agreed period. In return, clubs receive financial or physical resources which are deployed to maintain and to enhance the club’s performance (Bruhn 2018, p. 5; Bühler and Nufer 2013, p. 37).

Although the types of such arrangements can be rather diverse in practice (Fahrner 2012, pp. 217 ff.), the main value drivers are a club’s image and the level of awareness within the sponsor’s target group in regional, national and international markets (Nielsen Sports 2018a, p. 16). This makes the corporate brand management, besides sporting success, the second important factor for acquiring high-value contractual partnerships for this business segment (Esch et al. 2019, pp. 4 ff.). As the market research institute Nielsen stated in their 2018 report of the ‘Top 5 Global Sports Industry Trends’, “sponsorships are becoming more rich and multi-layered” (Nielsen Sports 2018b, p. 10). The expansion of their digital channels to activate and engage more fans in combination with collecting and sharing selective data of potential customers will lead to more individual tailored partnerships. This requires primarily the capability to align a club’s marketing strategies to the sponsor’s brand characteristics for being able to deliver standout content (Nielsen Sports 2018b, pp. 10 ff.).

Regarding the earnings of the ‘big five’ European football leagues in the financial year 2017, the Premier League (1,356 mEuro) and the Bundesliga (1,147 mEuro) accounted together for around 44.1% of all sponsorship revenues. Almost twice as much as the Spanish LaLiga (700 mEuro), which ranked third (UEFA 2019b, p. 66). Although the revenues “have continued to grow […] growth in the two dominant leagues […] slowed to a still-healthy 6% and 4%” (UEFA 2019b, p. 66). As the advertising surfaces are limited and already exhausted to a great extent, the possibilities of adding other major sponsors get restricted as well. Prospective growth potentials lie in the development of new foreign markets (Ansoff 1957, pp. 113 ff.; Breuer et al. 2018a, p. 34), by enlarging the relevant channels of communication to enhance the attractivity for new potential high-value sponsorships (Nielsen Sports 2018a, p. 23). For instance, the technology of ‘virtual perimeter advertising’, a regional adjusted virtual feed for international markets, has, according to Nielsen Sports (2018a), an estimated additional revenue potential in terms of the German Bundesliga of around 60 mEuro per year (Rentz 2018).

Furthermore, the e-sport segment is expected to become more and more relevant for potential sponsorships (Nielsen Sports 2018a, p. 22). Consequently, this segment is of high potential as a prospective secondary product on the market for passive sports consumption for professional football clubs as well (Ansoff 1957, pp. 113. ff.). It has to be mentioned, that several clubs are already expanding their businesses into this new segment, while others are concerned about negative effects like diluting the brand identity and a loss of authenticity (May 2018; SPONSORs 2019).

3.2.3. Merchandising

Although the main activities associated to the business segment merchandising refer to the development and commercialization of branded products and services, e.g. a club jersey or scarf, the actual scope goes beyond that (van Overloop 2015, p. 87). Following the definition of Rohlmann (2013), „sport merchandising includes planning, organizing, implementing and controlling of all activities, directed to current and potential supporters of a person, group or club […] Of particular importance are the cumulative effects of a systematical inter-connected merchandising concept according to the sporting reference object’s brand management” (Rohlmann 2013, p. 178). Based on this consideration, merchandising activities not only represent an additional source of income but also serve as a powerful tool for supporting a club’s strategic branding (Freyer 2018, p. 491; Nufer et al. 2017, pp. 316 ff.; Statista 2018, p. 21).

Regarding the ‘big five’ European football league clubs and the activation of their fans, measured by the ‘ownership-of-merchandise-share’, the Spanish LaLiga clubs hold the leading position, followed by the Italian Serie A [see Figure 8]. In comparison, the clubs of the English Premier League, the French Lique1 and the German Bundesliga still have a relatively high rate of unexploited revenue potentials (Statista 2018, pp. 7, 21). These survey findings get confirmed by examining the merchandising revenues of the Bundesliga during the past five years [see Figure 9]. It becomes obvious, that the overall trend can be considered as stagnating or even slightly declining. Regarding the ‘average-spending-on-merchandising’, the Bundesliga is ranked at the bottom as well. With only 55 Euro p.a., the clubs earn on average 16 Euro p.p. less than the clubs of the Serie A and even 45 Euro less than the LaLiga clubs in Spain (100 Euro p.a.) (Statista 2018, p. 7).

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Figure 8 Activation and monetarization of the fans - merchandise (left)

Figure 9 Merchandising revenues of the Bundesliga seasons 2013/14 to 2017/18 (in mEUR) (right)

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Sources: adapted from DFL (2015-2019)

Future growth potentials not only exist in the monetarization of more domestic fans but also in developing new foreign markets to activate additional customers. However, it must be noted, that beside, for instance, differences in consumer taste due to cultural differences and the affinity to football in general, differences on socio-economic factors, such as the disposable income in a target market, are especially critical to success (Huth et al. 2018, p. 35; Murphy 2018, p. 50). Therefore, the situation of mainly saturated domestic markets and the selection of prospective target markets constitute a restriction to the overall growth potential of this business segment.

3.2.4. Media Rights

The revenue streams associated with the business segment media rights, in general, constitute the main component of a professional football club’s total earnings. These include the commercialization of broadcasting rights, particularly with regard to tv, online and mobile as well as radio content. According to the management of an individual football club, corresponding possibilities to take influence are limited as the commercialization is mainly managed centrally, either by national associations such as the DFL for the German Bundesliga or on a European level by the Union of European Football Associations (UEFA). Within the ‘big five’ European football leagues, only the clubs of the Spanish LaLiga commercialize their rights themselves or assign the activities to external agencies (van Overloop 2015, pp. 84 f.). The allocation of revenues is based on a formula whereas the main share is related to a club’s duration of league membership and the current sporting success. Other criteria could be, for instance, a club’s sustainability and youth development as it is in the case of the German Bundesliga (DFL 2020a). A part with increasing significance is represented by revenues due to a club‘s qualification and participation in European competitions, especially the UEFA Champions League. According to the 2019/20 UEFA club competitions revenue distribution system, “the total amount available for distribution to participating clubs in 2019/20 is 2.55 bEuro, of which 2.04 bEuro will be distributed to clubs competing in the UEFA Champions League and the UEFA Super Cup, and 510 mEuro will be distributed to clubs participating in the UEFA Europa League” (UEFA 2019a). For comparison only, the total media receipts of the Bundesliga regarding the season 2017/18 only amounted to 1.25 bEuro (DFL 2019, p. 11). Consequently, this system enhances the importance of a club’s success within their national competitions, as the prerequisite for participation within the European competitions, and provides incentives for further investments in a club’s squad strength.

Determining factors of the demand are, besides the personal preferences of consumers, primarily economic determinants and the quality of the sporting competition. As the broadcasting rights nowadays are mainly held by pay-tv networks, costs of providing content and the willingness of potential consumers to pay, determine future growth within this segment. Furthermore, opportunity costs, such as missed out recreational activities, influence personal sports consumption as well. On this account, providing on-demand content to ensure a flexible consumption, e.g. by means of online and mobile formats, is of increasing importance. This applies in particular to the commercialization of content within an international context where potential consumers come across different time-zones which also impedes the consumption of live broadcasts (Daumann 2019, pp. 9 ff.; Parganas 2018, pp. 235 f.).

Regarding the total growth within the ‘big five’ European football leagues, it becomes obvious that the English Premier League achieved to expand their leading position massively over the past five years [see Figure 10].

Figure 10 Media rights revenue of the ‘ big five ’ European football leagues – 2012/13 and 2017/18 (in mEuro)

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Sources: adapted from Deloitte (2019c, p. 9), Stadionwelt (2013, p. 39)

Reasons for this include a greater amount of national pay-tv customers, i.e. the pricing-level of a pay-tv season ticket in England and Germany are equal, as well as greater success in foreign markets (Kalenberg 2019). While the international revenues of the Premier League account for 57.6% (1,850 mEuro), the Bundesliga by comparison, only earned 17.6% (220 mEuro) of the total broadcasting revenues in international markets regarding the season 2017/18 (Rehm 2018).

4. Motives and preconditions of internationalization

As already mentioned in the previous chapter, the ‘hyperactivity-phenomenon’, and the related constantly increasing financial needs in conjunction with nearly saturated domestic markets, causes the need for European professional football clubs to seek for new growth opportunities (Graf von Pueckler 2015, p. 38; Maderer 2015, p. 1). In accordance to the ‘theory of strategic corporate management’, the expansion of an existing product by entering new foreign markets is one of the classic generic growth strategies already described in 1957 by the mathematician and economist Igor Ansoff (Ansoff 1957; Wunder 2016, pp. 216 ff.). Although such strategies traditionally focus on the sales objective, motives for internationalization for ‘traditional’ as well as for professional football enterprises can be multi-layered [see Figure 11] (Morschett et al. 2010, p. 71).

Figure 11 The five most relevant alternative motives for internationalization

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Source: adapted from Morschett et al. (2010, p. 72)

Originally, these motives refer to companies whose business models are based on a rather classical production or service approach, which is why a detailed explanation of the theoretical background would go beyond the scope of this thesis [see e.g. Bartlett and Ghoshal (2000); Morschett et al. (2010, pp. 71-82)]. Nevertheless, there are linkages between the theory and the actual motives of professional football clubs in practice. Therefore, the following sections will briefly illustrate these linkages using specific examples referring to football clubs’ current business activities in an international context. The chapter will end with an overview of the main preconditions and success factors for implementing an internationalization strategy into a club’s corporate activities.

4.1. Strategic asset and resource seeking

As the distinction between the strategic asset and resource seeking motive, regarding the business activities of professional football clubs, is difficult to make, these motives are going to be pooled at this point. Traditionally, the resource seeking motive is relevant for companies which rely on “access to […] natural resources, [or] specific components from foreign suppliers […] with the aim of securing the necessary inputs for their companies” (Morschett et al. 2010, p. 75). Referring to necessary input factors of football enterprises, access to human resources, e.g. talents, coaches or training and medical experts, is the most likely equivalent to the traditional motive (Maderer 2015, pp. 9 ff.). The original strategic asset seeking motive implies “access to local knowledge, capabilities, technological resources, and innovations […] based on the idea that an international presence [can provide] a major information advantage” (Morschett et al. 2010, p. 78). In terms of the requirements of a professional football club, the access to local knowledge can also be linked to the idea of human resources as the most important production factor of football enterprises (van Overloop 2015, p. 36).

In accordance with those general linkages, a club’s cultural diversity today, either reflected by the squad itself or by the surrounding staff members, is the most salient example of international strategic asset and resource seeking of professional football clubs. As a result of systematic international scouting5 activities, the share of foreign players in the ‘big five’ European leagues increased from 9.1% in 1985/86 to 46.7% in the season 2015/16 (Poli et al. 2016, p. 1). Apart from that, more and more clubs are building up forms of local co­operation to expand their local knowledge in international markets. As an example, in January 2018, the German club FC Schalke 04 started a ‘strategic youth co-operation’ with the Chinese first league football club Hebei China Fortune FC. Aim of this co-operation was to establish a local system of supportive exchange of knowledge, especially in developing coaches and selecting and supporting local players. By this, the club secured access to local talents which exceeded the scope of regular scouting activities (Schalke04 2017, 2019). In terms of the degree of local presence and adaptation in international markets, the models established by Red Bull and the City Football Group went even further. They built up a system consisting of several regional football clubs in different international markets which are managed centrally [see Appendix 1]. This corporate structure of an integrated network combines the advantages originating from regional integration via acquired local football clubs, e.g. direct access and control over local talents, and global integration such as synergy effects through centrally controlled and interconnected international activities, e.g. transferring talents within this network (Held 2019; Krischel 2017; Morschett et al. 2010, pp. 16 ff., 29 ff.).

4.2. Efficiency seeking

Referring to the example of exploiting synergy effects by means of international activities, the aim of the efficiency-seeking motive ties in with this seamlessly. While these activities traditionally “try to exploit differences in factor costs […] or be designed to enhance economies of scale” (Morschett et al. 2010, p. 76), the opportunity of transferring talents within an international football club network without the necessity of paying a transfer fee, also supports a club’s overall cost efficiency (Held 2019).

An example which reflects the enhancement of the economies of scale motive via expanding international activities is linked to the implementation of a ‘virtual perimeter advertising’ system mentioned in the previous section. While a club at first must take the initial investment to implement such a system, the amortization accelerates with every additional international partner. Simultaneously, operating costs get dispersed, leading to a fixed cost degression and increasing marginal returns of each additional booking (SPONSORs 2019).

4.3. Follow-the-leader

The follow-the-leader or main competitor motive is based on the consideration “that companies tend to behave similarly in an oligopolistic industry situation with the objective of maintaining stability and avoiding seeking, observing, assessing and hiring talents in foreign countries (Gilbert and Job 2014). major changes in the competitive structure” (Morschett et al. 2010, p. 81). The strategic decisions of market selection, entry mode and timing get skipped, simply because companies cannot afford to surrender possible market potentials to their main rivals (Hill 2013, pp. 484 ff.; Morschett et al. 2010, p. 81).

In terms of professional football clubs, the ‘co-opetition characteristic’, mentioned in section 3, and the associated commercialization of the national league competition in foreign markets causes the necessity of a coordinated market development strategy. The simultaneous market entry of several clubs representing and promoting their domestic leagues in international markets, enhances the awareness and prospects of success of, for instance, the centralized commercialization of broadcasting rights (DFL 2019, pp. 28 f.; Graf von Pueckler 2015, p. 27). Besides this, the persistent business rivalry for talents, fans and potential sponsorships as additional sources of revenues still holds in an international context. The analysis and assessment of market potentials for leading European football clubs are relatively similar, with the consequence that the internationalization path seems to be mapped out to a large degree (Werner 2017). Therefore, this consideration could also be interpreted as a simple follow-the-leader approach of a club’s internationalization strategy.

4.4. Market seeking

As already stated, “the primary motive for starting activities in a foreign country is frequently the access to new markets and the sales potential offered by foreign markets. In particular when the home market is saturated” (Morschett et al. 2010, p. 72). While the deduction and determination of selection criteria will be an essential element of section 5, the sales potential motive seems to be almost self-explanatory.

Due to the characteristic of a restricted exportability of the gate revenue segment and the mainly centralized commercialization of the media rights, clubs focus their international activities on their scalable merchandising and sponsoring segments (Breuer et al. 2018a, p. 38). According to Joerg Wacker, board member of the FC Bayern Munich AG responsible for the area internationalization and strategy (FC Bayern 2020), “the main goals for an internationalization are in the first instance to increase brand awareness and then to generate additional revenues through sponsoring and merchandising in the following step” (Graf von Pueckler 2015, p. 38). As financial resources are a major precondition for sporting success, the development of additional revenue potentials in new foreign markets serves mainly two sub-strategies. Either clubs strive to close their strategic gap6, to catch up to main rivals (Dillerup and Stoi 2016, p. 312), or they extend their business activities to defend their established domestic position and ensure long-term high-level competitiveness (Breuer et al. 2018b, p. 1; Huth et al. 2018, p. 34).

4.5. Requirements and success factors of internationalization

Beside the clarification of motives and the execution of market evaluation and entry process (Wunder 2016, pp. 178 ff.), a football club also has to meet internal requirements. According to Joerg Wacker, the development and preservation of a strong brand serve as the core for the implementation of a potentially successful internationalization strategy. Therefore, the brand at first must pass through a multi-level process of evolving from a local and regional to a national brand, before a club will be able to establish itself on a global scale. Again, the current as well as the historical sporting success serves as the basis and helps to accelerate the process of expanding a club’s brand awareness (Post and Druker 2018, p. 5; Murphy 2018, p. 51). Once these preconditions have been met, a successful market entry and development strategy depend on clubs’ capabilities of adjusting and managing its brand regarding political, cultural and socio-economic conditions of the target market (Murphy 2018, p. 51). As the challenges related to the market selection process and managing a brand within an international context will be picked up and elaborated in the following course of the thesis, according to Post and Druker (2018) and Murphy (2018), further requirements and competitive advantages can be, for instance, associated to:

- The embedment of international activities, such as a regular physical presence in foreign markets, e.g. playing friendly matches, in the overall strategic planning of a club (Borussia Dortmund 2019a, pp. 42, 48);
- The extension of a club’s media presence, e.g. by means of the social media content (Borussia Dortmund 2019a, p. 45);
- The signing of foreign players as (brand-) ambassadors in international markets, e.g. the Portuguese player Cristiano Ronaldo has a social-media range of 320 million followers on Facebook, Instagram and Twitter all over the world (Seyffarth and Sommerfeldt 2018);
- Internationally-co-ordinated activities with well-known sponsors, e.g. multi-national operating companies such as the car manufacturer Audi for the FC Bayern Munich (Rosner 2016);
- The reputation and international linkages of the club’s location, e.g. due to its attraction on international tourists or because it is an important capital or metropolis (Putsch 2008).

5. The assessment of potential target markets

Since the club management detected the necessity for further expansion and the key pre-requirements for implementing an internationalization strategy are fulfilled, the next step focuses on the selection of potential target markets and the determination of the respective market potentials as well as the appropriate entry mode and timing within the following sub-sequences (van Overloop 2015, p. 46). In accordance to previous remarks on the limited exportability of the activities regarding matchday revenues, growth potentials are mainly related to the business segments merchandising, sponsoring and, with reservations due to centralized commercialization, media rights. Following the commercial perspective of Dietl (2010), the interest of the public reflects the most important foundation for further economic success [see Figure 12].

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Source: adapted from Dietl (2010, p. 7); own representation

Although the commercialization of media rights and sponsorship earnings are building the main part of a professional football club’s revenue structure, both revenue streams are the consequence of the level of public interest. Once the interest of the target group is awakened and demand exists, the competition or a particular club becomes more attractive for media reporting which enhances the advertising impact for potential sponsorships leading to additional earnings (Dietl 2010, pp. 6 f.). According to the market research institute Nielsen Sports (2014), “it will always be the fan that fuels the sports marketing and sponsorship industry and continues to drive it forward” (Nielsen Sports 2014, p. 5). Therefore, the attractiveness of potential foreign markets in practice gets mainly determined by socio-demographic and socio-economic indicators such as population and purchasing power as well as their respective growth rates (Huth et al. 2018, p. 38).

On this account, this section will examine current as well as prospective foreign markets with a special focus on the potentials referring to the interest of the public.

5.1. Research question and methodology

According to Ghemawat (2001), „companies routinely exaggerate the attractiveness of foreign markets, and that can lead to expensive mistakes” (Ghemawat 2001, p. 137). A central success factor for expanding corporate activities into foreign markets is based on the selection of target markets which should also consider the characteristics of the corporate products and services. The selection process must be based on a systematic analysis including qualitative as well as quantitative information of the local market conditions (Huth et al. 2018, p. 35).

Regarding the international activities of the German Bundesliga and considering the major financial competitive disadvantage towards the English Premier League, an explicit strategy to close the gap cannot be detected. In accordance with, i.a. van Overloop (2015) and Huth et al. (2018), clubs of the German Bundesliga do not reveal a differentiated systematic market analysis and selection approach related to their internationalization strategy (Huth et al. 2018, p. 33; van Overloop 2015, p. 130). With a focus on China and the United States, the market selection appears to be logical referring to socio-demographic respectively socio-economic conditions, but simultaneously, it seems to miss out further crucial elements of a strategic market analysis such as the competitive landscape and cultural characteristics (DFL 2019, p. 28; van Overloop 2015, p. 46). Using the example of broadcasting revenues as an indicator for the overall level of interest, in China the Premier League earned 227.3 mEuro within the season 2017/18, while the Bundesliga only achieved 47.3 mEuro which is even 2.7 mEuro less than the Spanish LaLiga (EU SME Centre 2019). Similar conditions hold for the United States (Ramcke 2018).

While this internationalization strategy only partially reflects and explains the financial competitive disadvantage of German clubs, it might not serve as a practical solution for enhancing competitiveness in the future. Therefore, this section will try to answer the following question:

Which determining factors must be examined to get a valid market potential of a prospective new foreign market, particularly considering possible impacts occurring from distance factors such as cultural and economic differences?

Aim of this analysis is to identify potential explanatory approaches which not only could serve as an explanation of the status quo but also as a basis for a systematical market analysis and selection approach of professional football clubs in the future.

H1 Using an adjusted market potential evaluation model, considering heterogeneous socio-economic market conditions as well as distance factors, can lead to a shift in assessing the attractiveness of international markets given the perspective of a professional football club.

5.1.1. Methodology

Following the recommendations of the strategic and international management literature, before analysing particular market conditions, a definition of the relevant market by means of differentiation criteria reconciled with, for instance, the corporation’s products and services, the target group and the competitive landscape has to be conducted (Dillerup and Stoi 2016, pp. 247 ff.). As a result, the market segments should reflect a homogeneous strategic business field, based on consistent characteristics and demands a company’s products or services are able to address (Wunder 2016, p. 89). Therefore, at first the target group and by this, the relevant market will be determined by means of publicly accessible market data as well as football-related market research reports of global acting consultancy firms.

Within the next step, determining and influencing factors of the sports market, defined as the aggregated revenues of the segments sponsorships, gate revenues, media rights fees and merchandising (PWC 2011, p. 2), will be derived. With respect to the broader concept of a driving forces analysis (Fleisher and Bensoussan 2015, pp. 243 ff.), which claims that “the first task in understanding industry evolution is to look for the DFs of the macroenvironment” (Fleisher and Bensoussan 2015, p. 244), an analysis based on historical market volume data as well as common macroeconomic indicators of the BRIC economies will be conducted. Aim of this procedure is not only to identify such indicators but also to make use of this information in terms of determining the attractivity of current and prospective markets.

Subsequently, potential target markets for professional football clubs, based on the findings of Nielsen Sports (2018c), will be examined following the theory of global expansion based on the idea of Ghemawat (2001). Within his ‘CAGE Distance Framework’ he states that “most of [the] costs and risks result from barriers created by distance […] [which besides the] geographical separation […] also has cultural, administrative or political, and economic dimensions that can make foreign markets considerably more or less attractive” (Ghemawat 2001, p. 138). The underlying principle of this theory is based on the ‘gravity model of trade flows’, proving that variations of trade flows can be explained by several distance variables reflecting the differences between pairs of countries. Within his research, he found out that “the various types of distances affect different industries in different ways” (Ghemawat 2001, p. 142). On this account, analysing potential foreign markets on the basis of these findings “represents an important complement to the tools used by most companies seeking to build or rationalize their country market portfolios” (Ghemawat 2001, p. 147). Due to the fact, that the football business industry, or rather the international expansion of football clubs and their domestic league competition constitute a relatively new phenomenon and historical data does not exist, the analysis will be based on aggregated import partner trade shares. The result, therefore, should only confirm the existence of distance factors within the selected potential markets by reflecting a general tendency of market acceptance or preferences of the respective target market.

5.1.2. The current state of research

Due to “the importance of the fan to right-holders, sponsors and the entire world of sports” (Nielsen Sports 2017, p. 2), within their ‘Fan Revolution’ report, the market research institute Nielsen Sports (2017) examined the behaviour and attitude of millions of sports fans from eight specific countries7 (Nielsen Sports 2017, p. 2). As a result, they identified that “seven clearly differentiated groups of fans emerged – each one with their own distinctive characteristics, behavioural tendencies and attitudes to sports and sponsors” (Nielsen Sports 2017, p. 7). The study classified these groups not only by socio-economic variables but also defined their respective tendencies of using social media channels, in terms of the specific content consumed, and their responses to sports-related marketing activities and channels. In addition, the report showed a heterogeneous structure of these fan groups within the investigated countries – “from the high proportion of Connection Fans in the USA to the abundance of Armchair Fans in Japan, to Germany’s greater proportion of Game Experts” (Nielsen Sports 2017, p. 10). In conclusion, these findings suggest that sport-related marketing activities of right-holders, sponsors or brands, within an international context, must be adjusted to the country-specific characteristics to reach their full potential (Nielsen Sports 2017, pp. 10 ff.).

[...]


1 Brand awareness is related to […] the consumer’s ability to identify the brand under different conditions” (Keller and Swaminathan 2020, p. 71).

2 eeking, observing, assessing and hiring talents in foreign countries (Gilbert and Job 2014).

3 It is self-evident that objectives of a particular club can be divergent, for instance due to a club’s legal form or ownership structures.

4 With reference to and demonstrated by means of a game theoretical approach (Solberg and Haugen 2010, pp. 335 f.).

5 eeking, observing, assessing and hiring talents in foreign countries (Gilbert and Job 2014).

6 “Simply, the strategic gap reflects the imbalance between the current strategic position of the organization and its desired strategic position” (Harrison 1996, p. 47).

7 “Simply, the strategic gap reflects the imbalance between the current strategic position of the organization and its desired strategic position” (Harrison 1996, p. 47).

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Details

Title
The internationalization of professional football clubs. Potential markets and the brand personality of Borussia Dortmund
College
University of Applied Sciences Dortmund
Grade
1,3
Author
Year
2020
Pages
81
Catalog Number
V588188
ISBN (eBook)
9783346219244
ISBN (Book)
9783346219251
Language
English
Tags
borussia, dortmund, potential, brand personality, market, brand identity, soccer, football, internationalization, culture, market analysis
Quote paper
Christian Weißkopf (Author), 2020, The internationalization of professional football clubs. Potential markets and the brand personality of Borussia Dortmund, Munich, GRIN Verlag, https://www.grin.com/document/588188

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