Strategic Management in Tourism, Sports and Event - Case Study Example

? Strategic Management in Tourism, Sports and Event Case Study Strategic Management in Tourism, Sports, and Event Case Study Sports industry has grown considerably due to the growing interests related to games, health and fitness. Alongside the growth of sport industry, the requirement of incorporating proper strategic techniques has gained much importance in order to sustain the development (Pfahl, 2010). Focusing on this aspect, the case study intends to reveal ways of doing business in light of increased environmental concerns for a popular sport organisation namely Manchester United Football Club. Besides, the case study also discusses various growth strategies that can be used for Manchester United to expand the business. Corporate Social Responsibility In the context of strategic management, corporate social responsibility (CSR) is significantly influencing the business at an alarming rate. CSR is linked with core business objectives and core competencies and it can provide positive financial yields for Manchester United along with facilitating it to create a positive environmental impact in the world (McElhaney, 2009). New Ways of Doing Business In current business context, environmental problems such as climate change create an impact on every aspect of the economy and sports industry is no exception. Sports business is potentially an environmentally sensitive segment and is likely to be impacted by climate change. In present days, there is an increasing awareness about certain environmental issues such as greenhouse gas (GHG) emission, carbon emission, energy consumption and waste management among others (The Higher Education Academy, 2008; Carroll & Shabana, 2010). CSR Initiative Optimal for Manchester United The corporate trend towards CSR signifies substantial prospects for Manchester United to capitalise on pervasive demands of sports along with the financial strength of the business (Manchester United Limited, 2011). In order to understand the most optimal CSR initiative for an organisation, first there is a need to make an internal analysis such as SWOT. Appendix 1 and 2 shows the SWOT analysis of Manchester United and the SWOT analysis with the aid of Weighting/Ranking System. Concerning the internal aspects of Manchester United, it can be stated that the organisation possesses a number of ways for positioning the CSR strategies. For instance, it can make progression towards accomplishing profit objectives by of its involvement in sport related or spectator services along with developing partnerships with other organisations in an attempt to advance CSR programs (Smith & Westerbeek, 2007). Clear CSR Leadership Position In order to be competitive in present day’s business environment, organisations must constantly innovate and observe the activities of the competitors. Manchester United has corporate responsibility to ensure safe and healthy atmosphere and is committed to maintain sound environmental performance by constant maintenance of environmental management system (Akesson, 2010; Breitbarth et al., 2011). Strategic Group Analysis of Sports Industry Strategic group is a concept which is used to classify groups of organisations within similar industry, having similar business models (Reger & Huff, 2010). The following figure will show the strategic groups in the United Kingdom sports industry with reference to football segment. Aspects such as extent of branding and number of market segment served have been used for demonstrating the strategic group of Manchester United. According to the above figure, the key competitors of Manchester United in the Asian market are Arsenal Holdings plc, Chelsea and Liverpool Football Club (Henry, 2008). Arsenal and Chelsea have focused on Asian participation being through academies and programs while Liverpool is focusing on Indian market for opening of its own academy (Chelsea, 2013; The Arsenal Football Club Plc, 2011; Eurosport, 2013) Growth Strategy for 2014 to 2015 Business growth for an organisation can be accomplished by two ways namely inorganic growth strategy and organic growth strategy. Inorganic growth strategy is observed as a relatively quicker method of enhancing the business. In several industries such as technology or manufacturing, business growth is frequently accelerated by organic ways like through asset reproduction, exploitation of new technologies and innovation among others (Chen et al., 2009). On the other hand, in inorganic growth strategy, organisations grow by way of merger, acquisition, and takeovers. In this context, it can be stated that in today’s rapidly changing business environment, inorganic growth approaches can help organisations to enter new markets, enlarge the customer base, diminish competition and apply new technologies with respect to products, people and procedures. Since Manchester United desires to strengthen its presence in Asian region, inorganic growth strategy would be appropriate for the company (Indian Council for International Amity, 2009). The six reasonable options which can be used by Manchester United are as follows: Intensive Growth Strategy Intensive growth strategy comprises raising the market share, revenue and profit of current products or services. In this strategy, Manchester United will require to slowly increase its business internally. There are three ways through which Manchester United can enhance the business namely market penetration, market development and product or service development. Nevertheless, the key disadvantages of intensive growth strategy are that it will lead to slow progress and will require a considerable amount of time for growth. Furthermore, by using intensive growth strategy, Manchester United can lose the possibility of using several business prospects because it can restrict the operations to existing services, bring about excessive funding requirements, risks, technological improvements and better marketing initiatives (GabRielsson et al., 2008). Diversification Strategy Manchester United can also use diversification strategy in order to grow the business. It involves adding a variety of services or products to the existing lines. However, there are certain limitations of this strategy for Manchester United such as the requirement of funds, problems associated with coordination, difficulties in adjustment and possibility of failure (Ghayur et al., 2012). Modernisation Strategy Modernisation for Manchester United comprises improvement of technology and business procedure, minimisation of costs from different operations, better utilisation of assets, minimisation of wastages and reduction in the usage of energy, water and other valuable resources among others. However, the key limitation of this strategy is that the accumulated fund might not be sufficient to provide financial support for modernisation (Ghayur et al., 2012). Merger Strategy Merger is inorganic external growth strategy which can be used by Manchester United to expand the market. There are two ways through which Manchester United can merge with new organisations such as through takeover and through amalgamation. Takeover in this context involves taking control of the other organisation. While, amalgamation occurs when different organisations merge their corporate identities in one approachable atmosphere (Akgobek, 2012). Joint Venture Strategy Manchester United can engage in joint venture by developing partnerships with different organisations in the similar nations or in foreign nations (Tong et al., 2008). Acquisition Strategy Acquisition is the other strategy that can be used by Manchester United. Acquisition comprises intense negotiation where an organisation provides cash for acquiring the major share in the market. Concerning the six strategies for growth, merger, joint venture and acquisitions are considered as the best suitable for business growth of Manchester United. The key reason is that intensive growth, diversification, and modernisations can only allow attaining growth to a certain point. Besides, these growth strategies can be disenchanted by competition, causing Manchester United to cut back prospects. On the other hand, strategies such as merger, joint venture and acquisition can help in instant growth of assets, revenues and market existence. Besides, it can also provide Manchester United a robust link of acknowledgement due to the combined worth of businesses. Manchester United can also be benefitted from additional expertise derived from the human resources of new businesses (Cartwright & Schoenberg, 2006). Evaluation of the Growth Strategies In order to evaluate the growth strategies, weighting and raking analysis has been conducted on the six growth strategies. Three suitability criteria have been evaluated namely environmental suitability, capability suitability and expectation suitability in order to measure the aptness of the strategies. Appendix 3 shows the weighting and ranking analysis of the six strategies described above. On the basis of weighting and ranking analysis (see appendix 3), it can be observed that intensive growth, modernisation and diversification have low ratings whereas merger, joint venture and acquisition have high rating according to suitability criterion. These three strategies have been described below: Merger Strategy Merger denotes the absorption of one organisation by the other. Through acquisition strategy, an organisation can hold the name as well as individuality along with the assets and the liabilities of acquired organisation. In this context, Manchester United can merge with one of the three organisations namely International Management Group (IMG), Village Roadshow Limited and GPT Hotel Group. With respect to merging with IMG, it will enable Manchester United an opportunity to undertake better and large-scale operations. Then again, with respect to Village Roadshow Limited, merger will help Manchester United to ascertain better utilisation of funds and more effective use of resources. Conversely, merging with GPI Hotel Group will enhance the possibility to diversify the business. Yet, merger has several disadvantages for organisations. Merger requires majority approval, and it is a time consuming and complicated process. Besides, cooperation is needed after merging to a single organisation which is quite difficult to accomplish, due to unique characteristics of each organisation (Chui, 2011). Joint Venture Strategy The potentiality of strategic alliance for Manchester United is enormous if it is implemented in proper manner. In this context, it can be stated that joint venturing with IMG will allow Manchester United to enter into related businesses in a new geographic market. On the other hand, joint venture with Village Roadshow Limited will provide Manchester United the opportunity to achieve new capability and knowledge. Then again, joint venture with the GPT Hotel Group can help to access new markets and to develop strong distribution network. However, joint venture can lead to several disadvantages for Manchester United. For example, every organisation has its own unique culture and management style which can cause problems for Manchester United regarding integration and cooperation (Steensma et al., 2008). Acquisition Strategy Acquisition can provide similar advantages of merger to Manchester United. For instance, through acquisition of IMG, Manchester United can enjoy higher economies of scale. With respect to Village Roadshow Limited, acquisition can help Manchester United to rehabilitate the organisation. Furthermore, it can also allow Manchester United to obtain access of scarce resources along with establishing a strong distribution network. Since Village Roadshow is related with stadium development activities, acquiring this organisation can facilitate to enhance the managerial expertise of the organisation. On the other hand, concerning The GPT Hotel Group, acquisition of this organisation will help to gain quick entry into new business line (Erel et al., 2012). Recommendations for Growth Strategies There are three strategic choices available for Manchester United to enhance the business. However, the key question arising in this context is how to select the most optimal strategy among the three strategies. To derive an understanding, Porter’s Five Forces analysis has been conducted for Manchester United (see appendix 4). Concerning the Porter’s Five Forces analysis, it can be stated that for Manchester United, the bargaining power of suppliers is quite high. However, the bargaining power of buyers is moderate. On the other hand, the threat of substitute products of Manchester United is low. Manchester United faces strong rivalry from key competitors and there is a low barrier to entry in sports segment. A valid path is to choose the strategy which has better possibility of success. The possibility of success can be determined by Suitability, Feasibility and Acceptability (SFA) analysis of the strategies. Suitability: Suitability signifies providing justification for selecting a specific strategy. Concerning suitability of the strategies, financial, technological, cultural and industrial suitability have been measured. Appendix 5 demonstrates suitability of the three growth strategies. Feasibility: Feasibility signifies the ability of an organisation to follow certain strategy. It is essentially an evaluation of internal abilities. The feasibility of the three growth strategies has been measured through resources, abilities and competencies. Acceptability: Acceptability concentrates on two key aspects namely financial and stakeholders. Financial aspects comprise level of return and level of risk. On the other hand, stakeholder aspects comprise response to the strategic choices. Appendix 5 demonstrates SFA analysis of the three growth strategies. By going through SFA analysis of three growth strategies, it can be observed that merger is the most suitable, feasible and acceptable strategy for enhancing the business. Concerning the three organisations, it can be recommended that the merger with GPT Hotel Group would be beneficial for Manchester United. The reason for suggesting GPT Hotel Group among the three organisations is that it will enhance the organisational value and provide increased cost advantages. Since GPT Hotel Group has different business areas, Manchester United will be required to go through conglomeration process. It will not only help to differentiate the business, but would also facilitate Manchester United to enlarge the revenue sources. Besides, sports and tourism industry are related with each other, thus merger between Manchester United and GPT Hotel Group will help to tap into a new customer market segment. Manchester United will also be able to enlarge the business and enter into a new market. The merger will be a stepping stone for diversifying and enlarging the business operations for Manchester United (Denison et al., 2011). References Akesson, T. (2010). Corporate social responsibility benchmarking in the sporting goods industry. International Business, 1-64. Akgobek, I. (2012). Mergers and acquisitions as a growth strategy. International Conference on Business, Economics, and Behavioral Sciences, 108-112. Breitbarth, T., Hovemann, G., & Walzel, S. (2011). Scoring strategy goals: measuring corporate social responsibility in professional European football. Thunderbird International Business Review, 53(6), 721-737. Cartwright, S., & Schoenberg, R. (2006). Thirty years of mergers and acquisitions research: recent advances and future opportunities. British Journal of Management, 17(1), 1-5. Chelsea. (2013). Asian Participation. Retrieved from http://www.chelseafc.com/foundation-article/article/1875187 Carroll, A. B., & Shabana, K. M. (2010). The business case for corporate social responsibility: a review of concepts, research, and practice. International Journal of Management Reviews, 85-105. Chen, X., Zou, H., & Wang, D. T. (2009). How do new ventures grow? Firm capabilities, growth strategies and performance. International Journal of Research in Marketing, 26, 294-303. Chui, B. S. (2011). A risk management model for merger and acquisition. International Journal of Engineering Business Management, 3(2), 37-44. Denison, D. R., Adkins, B., & Guidroz, A. M. (2011). Managing cultural integration in cross-border mergers and acquisitions. Advances in Global Leadership, 6, 95-115. Erel, I., Liao, R. C., & Weisbach, S. (2012). Determinants of cross border mergers and acquisitions. The Journal of Finance, LXVII (3), 1045-1082. Eurosport. (2013). Liverpool unveil India academy plans. Retrieved from http://asia.eurosport.com/football/premier-league/2012-2013/liverpool-unveil-india-academy-plans_sto3966169/story.shtml GabRielsson, M., GabRielsson, P., Al-obaidi, Z., & SaliMaki, M. (2008). Firm response strategies under globalization impact in high-tech and knowledge-intensive fields. Law, Technology & Arts, 1, 9-32. Ghayur, K., Heaney, R., & Platt, S. (2012). Passive implementation of factor diversification strategies. Westpeak Global Advisors, LLC, 1-17. Henry, A. (2008). Understanding strategic management. New York: Oxford University Press. Indian Council for International Amity. (2009). Organic vs. inorganic growth. In Focus, 67-76. Manchester United Limited. (2011). Environmental policy statement. Retrieved from http://www.manutd.com/~/media/Files/PDF/ClubCharter/2011/ENVIRONMENTAL_POLICY_STATEMENT.ashx McElhaney, K. (2009). A strategic approach to corporate social responsibility. Leader to Leader, 30-36. Pfahl, M. E. (2010). Strategic issues associated with the development of internal sustainability teams in sport and recreation organizations: A framework for action and sustainable environmental performance. International Journal of Sport Management, Recreation & Tourism, 6, 37-61. Reger, R. K., & Huff, A. S. (2010). Strategic groups: a cognitive perspective. Strategic Management Journal, 14(2), 103-123. Smith, A. C. T., & Westerbeek, H. M. (2007). Sport as a vehicle for deploying corporate social responsibility. JCC, 1-12. Steensma, H. K., Barden, J. Q., Dhanaraj, C., Lyles, M., & Tihanyi, L. (2008). The evolution and internalization of international joint ventures in a transitioning economy. Journal of International Business Studies, 39, 491-507. The Higher Education Academy. (2008). Resource guide to climate change issues in tourism and leisure. Hospitality, Leisure, Sport and Tourism Network, 1-24. Tong, T. W., Reuer, J. J., & Peng, M. W. (2008). International joint ventures and the value of growth options. Academy of Management Journal, 51(5), 1014–1029. The Arsenal Football Club Plc. (2011). Arsenal Football Club launch new Arsenal Soccer School in China Guangdong Province latest addition to Gunners' overseas grassroots activity. Retrieved from http://www.playthearsenalway.com/extras/news_23.html Appendices Appendix 1: SWOT Analysis of Manchester United Appendix 2: SWOT Analysis of Manchester United By Using Weighting/Ranking System Strengths Weight Calc Weighting Rating Score Strong International Brand Name 8 0.20 4 0.80 Quality Merchandising 7 0.18 4 0.72 Association with Global Sponsors 7 0.12 3 0.36 Weaknesses         Financial Issues 6 0.30 1 0.30 Saturated Market 7 0.20 1 0.20 Total 35 1.00   2.38 Opportunities Weight Calc Weighting Rating Score Exploit the Emerging Markets in Asia 9 0.35 4 1.40 Proper advertisement can lead to strong brand visibility and equity 8 0.15 3 0.45 Threats         Competition from other clubs 7 0.30 3 0.90 Internal Issues between players and organisation 6 0.10 2 0.20 Financial problem due to expensive players 5 0.10 2 0.20 Total 35 1.00   3.15 Appendix 3: Weighting and Ranking Analysis of Growth Strategies Suitability Criteria Intensive Growth Diversification Modernization Merger Joint Venture Acquisition Environmental Suitability 6.5 6 7 8 7 8 Capability Suitability 8 6.5 7 9 8 6 Expectation Suitability 5 8 6 10 9 7 Weighting 19.5 20.5 20 27 24 21 Rating 1 3 2 6 5 4 Appendix 4: Porter’s Five Forces of Manchester United Appendix 5: SFA Analysis of Three Growth Strategies Suitability Criteria Merger Joint Venture Acquisition Economic suitability 8 7 6 Technological suitability 9 9 8 Cultural suitability 7 6 9 Industrial suitability 9 8 8 Weighting 33 30 31 Rating 3 1 2 Feasibility Criteria Merger Joint Venture Acquisition Resources 9 8 7 Abilities 9 7 6 Competencies 9 7 7 Weighting 27 22 20 Rating 3 2 1 Acceptability Criteria Merger Joint Venture Acquisition High Return 9 9 8 Low Risk 7 7 7 Positive Reaction 8 7 7 Weighting 24 23 22 Rating 3 2 1 Read More