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The Positioning of Arsenal FC in the Business Environment and Recommendations for Future Strategy

1. Introduction

This report discusses the position of Arsenal FC in the business environment and recommends a future strategy for the club. The business environment is analysed using macro and micro environmental factors.Arsenal FC’s resources and capabilities are also evaluated and its current strategy is critiqued. Based on these analyses, recommendations for Arsenal FC’s future strategy are proposed.

2. Positioning of Arsenal FC in the Business Environment
2.1 External Analysis

2.1. The macro-environment
The macro-environment comprises of broad environmental factors that have an impact on all organisations within an industry (Hill & Jones, 2016). These factors can be categorized as political, economic, social, technological, environmental and legal (PESTEL) factors (Hill & Jones, 2016). The following section will discuss how some of these macro-environmental factors have impacted or are expected to impact Arsenal FC.

Political: The United Kingdom’s membership of the European Union (EU) has had implications for the free movement of players within Europe, which has impacted Arsenal FC (Bailey, 2017). For example, the Bosman ruling in 1995 meant that clubs were no longer able to charge transfer fees for players aged 24 or over who were out of contract (Bailey, 2017). This ruling led to an influx of foreign players in the Premier League and also resulted in English clubs signing more foreign players (Bailey, 2017). In addition, Brexit is likely to have implications for the free movement of players after the UK leaves the EU (BBC News, 2018). For example, it is possible that there could be a limit on the number of foreign players that clubs can sign if freedom of movement is restricted (BBC News, 2018). This could have an impact on Arsenal FC as the club has signed a number of foreign players in recent years.

Economic: One of the main economic factors that has impacted Arsenal FC is escalating player wages (Wilshere, 2018). Inflation and the global financial crisis have led to an increase in player wages across Europe (Wilshere, 2018). For example, Alexis Sanchez became Arsenal’s highest paid player when he signed a contract worth £350,000 per week in January 2018 (Rutherford, 2018). This increase in player wages has made it difficult for Arsenal to compete with other clubs who are able to offer higher wages to their players. In addition, many Arsenal players have been sold for large sums of money in recent years which has generated significant transfer fee income for the club (Orr, 2018). For example, Alex Oxlade-Chamberlain was sold to Liverpool for £35 million in August 2017 (Wilshere, 2018). However, this transfer fee income has not been reinvested in the squad and this has contributed to a decline in results on the pitch.

Social: Social media is increasingly being used by football clubs to connect with fans and promote their brand (Miller & Mills, 2014). Arsenal FC was one of the first clubs to launch its own social media channels and it now has over 70 million followers across all platforms (Arsenal FC, 2018a). Social media is an important tool for generating revenue as it can be used to sell merchandise and tickets and also to attract sponsorship deals (Arsenal FC, 2018b). In addition, social media can be used to engage with fans and build relationships with them (Miller & Mills, 2014). For example, Arsenal FC posted a message on Twitter asking fans to vote for their Goal of the Season, which generated a lot of engagement from supporters (Arsenal FC, 2018c).

Technological: Technology has had a number of impacts on Arsenal FC and the game of football in general. One of the most significant technological advances in recent years has been the introduction of VAR (Video Assistant Referee) (CAF, 2018). VAR is a technology that is used to review decisions made by the referee during a match and it is currently being trialled in a number of competitions, including the World Cup (CAF, 2018). VAR is likely to have a positive impact on Arsenal FC as it will help to improve accuracy and fairness in decision-making. In addition, social media and streaming platforms such as YouTube and Twitch have made it easier for fans to follow their favourite teams and players (Miller & Mills, 2014). For example, Arsenal FC’s matches arestreamed live on its official website and YouTube channel, which enables supporters to watch the team even if they cannot attend the match in person (Arsenal FC, 2018d).

2. 1.2 Industry analysis-Porter’s five forces

Porter’s five forces model can be used to analyse the competitive forces within an industry (Porter, 1979). The following section will apply Porter’s five forces model to the football industry in order to assess the position of Arsenal FC within this industry.

The threat of new entrants: New clubs are not likely to enter the football industry as it is difficult to obtain a licence to play in one of the major leagues, such as the Premier League (Grieveson & Treble, 2002). In addition, new clubs would need to invest heavily in order to be competitive, which would be difficult to achieve given the current financial state of most football clubs (Grieveson & Treble, 2002). As a result, the threat of new entrants is low.

The threat of substitutes: The main substitutes for football are other sports such as rugby, cricket and tennis (Grieveson & Treble, 2002). However, these substitutes are not likely to have a significant impact on football as they appeal to different audiences (Grieveson & Treble, 2002). For example, rugby is more popular in countries such as England and Wales whereas football is more popular in countries such as Spain and Italy (Grieveson & Treble, 2002). As a result, the threat of substitutes is low.

Bargaining power of buyers: The bargaining power of buyers is high as there are many alternatives available to them. For example, supporters can choose to watch another sport if they are not satisfied with the product on offer from their favourite football club. In addition, supporters can choose not to attend matches or watch them on television if they feel that ticket prices are too high. As a result, clubs need to ensure that they provide value for money in order to retain their supporters.

Bargaining power of suppliers: The bargaining power of suppliers is moderate as there are not many alternatives available to clubs. For example, clubs need to purchase players from other clubs in order to improve their squad. In addition, clubs rely on broadcasters such as Sky Sports and BT Sport for television rights fees. However, these broadcasters compete with each other for the rights to show live matches, which gives clubs some negotiating power.

The intensity of competitive rivalry: The intensity of competitive rivalry is high as there are many clubs competing for the same trophies. In addition, the Premier League is one of the most popular leagues in the world and this creates a lot of interest and speculation about which clubs will be successful. As a result, clubs need to ensure that they have a strong squad and are able to attract big-name players in order to compete with their rivals.

2. 2 Internal Analysis-Resources and Capabilities

The following section will assess Arsenal FC’s resources and capabilities in order to determine its strengths and weaknesses.

Arsenal FC’s main strengths are its brand, stadium and academy. The club has a strong brand that is recognised worldwide and this enables it to generate significant revenue from commercial activities such as sponsorship and merchandising (Arsenal FC, 2018e). In addition, Arsenal FC has a large stadium that generates revenue from matchday activities such as ticket sales and hospitality (Arsenal FC, 2018f). The club also has a successful academy that has produced a number of players who have gone on to play for the first team, such as Jack Wilshere and Aaron Ramsey (Arsenal FC, 2018g).

Arsenal FC’s main weaknesses are its financial position and squad depth. The club has a large amount of debt and it has struggled to generate enough revenue to cover its costs in recent years (Arsenal FC, 2018h). This has led to the sale of some of the club’s best players, such as Alexis Sanchez and Alex Oxlade-Chamberlain, in order to generate transfer fee income (Orr, 2018). In addition, Arsenal FC’s squad is not as strong as it once was and this has contributed to a decline in results on the pitch (Wilshere, 2018).

3. Evaluation of Arsenal FC’s Current Strategy
3.1 Financial perspective

Arsenal FC’s current strategy is focused on generating revenue through commercial activities such as sponsorship and merchandising (Arsenal FC, 2018e). This has enabled the club to generate significant revenue in recent years but it has also resulted in a decline in results on the pitch (Wilshere, 2018). For example, Arsenal FC finished sixth in the Premier League in 2017/18 after finishing fifth in the previous season (Premier League, 2018). In addition, the club failed to qualify for the Champions League for the second consecutive season (Premier League, 2018). This decline in performance is likely to have an impact on Arsenal FC’s commercial revenue as supporters may be less likely to purchase merchandise or tickets if the team is not doing well.

3. 2 Customer perspective

Arsenal FC’s current strategy is focused on attracting new supporters and engaging with existing supporters (Arsenal FC, 2018b). The club has launched a number of initiatives in recent years in order to engage with supporters, such as matchday experiences and social media campaigns (Arsenal FC, 2018c). However, the decline in results on the pitch is likely to have an impact on supporter engagement as many fans may be less interested in the club if it is not doing well. In addition, the sale of key players such as Alexis Sanchez and Alex Oxlade-Chamberlain is likely to have made some supporters feel that the club is not ambitious and this could

FAQ

Arsenal FC's current business strategy is to focus on improving its financial performance while also remaining competitive in the Premier League.

The main challenges that Arsenal FC faces in its current business environment are a challenging economic climate, increased competition from other clubs, and continued pressure to succeed on the pitch.

Arsenal FC's business strategy has evolved over time to become more focused on generating revenue and becoming financially sustainable.

The key successes of Arsenal FC's business strategy to date have been its ability to generate significant revenue streams and become one of the most valuable football clubs in the world. However, the club has failed to win a major trophy since 2005, which has led to some criticism of its business model.

The future direction of Arsenal FC's business strategy should be focused on continuing to improve its financial performance while also reinvesting in the playing squad and infrastructure to compete for trophies on a consistent basis.

Specific recommendations for how Arsenal FC can improve its future business performance include increasing matchday revenues, growing commercial revenues, and improving player recruitment and development processes.

I am confident in my analysis and recommendations for Arsenal FC's futurebusiness strategy as I believe they are based on a thorough understanding of the club's history, current situation, and potential opportunities going forward.

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