Wednesday, October 17, 2012

Case study: Manchester United Club

Case study on  Manchester United in the reference book CORPORATE STRATEGY  authored by Gerry Johnson (University of Strathclyde), Kevan Scholes (Sheffield Hallam University ) and Richard Whittington (Saïd Business School, University of Oxford ) is a  good example changing culture and  changing strategy with time.  Following are the suggested solutions :

Question 1   Do you feel that the various aspects of corporate governance discussed in section  4.2 are appropriate for a football club? What changes in governance would you  like to see?

Ans :  Manchester United is undeniably both big and a business driven by the expectations of the stakeholders. They both are at the extreme –
1.   Football Lovers  :  who would go frenetic  to see that their club wins  all the matches and trophies.  For that they do not mind travelling many miles to cheer up the players. 
2.   Investors  :  Their expectation is only increasing shareholder’s wealth like big  corporate. The club management’s financially driven ethos is undermining the  ‘most followed game’.

The governance of the club has to have a balance between these two extremes. In today’s context organizations are expected to be accountable and responsive, not only to those owners and managers in the governance chain but to a wider range of stake holders – including community at large.

In larger organizations like Manchester United, governance chain is complicated as there is a need to employ professional managers to run the organization without being shareholders on the board – that adds several layers in the management.

The concept of governance chain challenges the directors and the managers to be knowledgeable about  the expectations of the beneficiaries to actively work on their behalf and to keep them informed.
Martin Edwards, major share holder acted as Chief Executive till Peter Kanyon  in 2000 joined as a professional Chief Executive. Edwards was not at one with the manager Sir Alex Ferguson and was unpopular with the fans for his attempts to sell the club.

Principle- Agent model is a reminder that ‘agents’ will tend to work in their own self interest and need to be encouraged to work in the interests of the principal. In case of Manchester United to define the principal is a debatable matter. Existence of the club is due to investors, but it is the performance of the players  which builds the fan following. The popularity of club is based on the game of players like David Beckham. The club treats them as a commodity and trades in the benefit of shareholders.

The facilities in club for training and stadium all needs capital. Listing of MUFC as a Plc on the stock market get bonuses. Because training facilities are provided by the club, so they have put a limit to wages below 50% of budget  which leads to players down graded performance. All the money comes from the fans. The club does not repay back them anything except the entertainment. For sustained fan followership, the clubs  need to look at their CSR programs.

Question 2  Using section 4.3.1 and exhibit 4.5 undertake a stakeholder mapping exercise for any strategic development that is likely to be under consideration by the board (for example, ‘The formation of a European super league of major clubs’). How would  you use this analysis if you were: a board member wishing to support the strategy?  an opponent of the strategy?

Ans . :  Stakeholder mapping identifies stake holder expectations and power and helps in understanding political priorities. It underlines the importance of two issues :
  • How interested each stakeholder group is to impress its expectations on the organization’s purposes and choice of specific strategies.
  • Whether stakeholders have the power to do so.

For Manchester United if we drawup the stakeholder map it would be as follows :

  Stakeholder mapping identifies stake holder expectations and power and helps in understanding political priorities. It underlines the importance of two issues :
  • How interested each stakeholder group is to impress its expectations on the organization’s purposes and choice of specific strategies.
  • Whether stakeholders have the power to do so.

For Manchester United if we drawup the stakeholder map it would be as follows :

Organization might address the expectations of the stakeholders in segment B through information – for example the community groups. These stake holders can be crucially important “allies” in influencing the attitudes of more powerful stake holders : for example, through lobbying.

Stakeholder mapping might help in understanding better some of the following issues :
·         Whether the actual levels of interest and power of stakeholders properly reflect the corporate governance framework within which the organization is operating.
·         Who the key blockers and facilitators of a strategy are likely to be.
·         Whether repositioning of certain stakeholders is desirable and / or feasible.
·         Maintaining the level of interest or power of some key stakeholders may be essential. E.g. public ‘endorsement’ by powerful suppliers or customers may be critical to the success of a strategy. Equally, it may be necessary to discourage some stakeholders from repositioning themselves. This is what is meant by keep satisfied in relation to stakeholders in Segment C, and to a lesser extent to keep informed for those in segment B.

These questions raise some difficult  ethical issues for managers in deciding the role they should play in the political activity surrounding strategic change.

Most stakeholder groups consist of large numbers of individuals (such as customers or shareholders), and hence can be thought of largely independently of the expectations of individuals within that group. With some stakeholder groups this is not the case : they consist of a small number of individuals or even single individuals (e.g. the chairman of the company or the minister of a government department).

Question 3   Refer to exhibit 4.7 and decide which ethical stance you feel best describes Manchester United now and how you would wish to see the club. Justify your own  position.

Ans :  Different companies take different ethical stances.  There is likely to be a strong relationship between the ethical stance, the character of the Manchester United and how strategy is managed.  The four type of ethical stances can be :

Manchester United Directors can probably be classified under  longer-term shareholder interests category. A  sports club may also be considered with a stance of multiple stakeholder obligations  as players and channel partners do have strong stake in the affair of the club. But the strategy control in the case remains internally with the directors  and chief executive.

The second type of  ethical stance is  tempered with long term financial benefit to the share holders of well managed relationship with other stakeholders. The strategy of the club to tie up with Nike and New York Baseball club confirms this stance.  Building a stadium with a capacity of more than 65,000 seats at Old  Trafford serves the purpose of above stated objective.

The corporates make  attempt to ‘give something back’ to the society.   Manchester United  also established   a partnership to raise £ 1 mn for unicef, the united nations children fund in the year 2000. This was perceived as fitting the ethos of the Manchester united as reaching out to global children and involve visits by players and officials to some of the poorest communities in the world in Mangolia, Brazil and Uganda, united encountered some families surviving on salary less than  £200 a year.

This attempt can not be seen as a shift towards shaper of society. The club claimed that one should not underestimate the power of football influence others including governments. So the fund raising for the Unicef was a step to build loyalty of fans through brand  building.

Que. 4   Refer to section 4.5.3 and decide what you feel were the key cultural characteristics  of Manchester United in terms of values, beliefs, behaviours and taken-for-granted  assumptions: (a)pre-1990, and (b) today?  What are the implications of these  changes to current and future strategies?

Ans. :  As  the Manchester United has  grown  there emerges a  change in ethical stance.  This has  also brought in a major  change in the loyalty towards the club.  It gets reflected from the transfer of star  player David  Beckham  to Spanish club Real Madrid  and  Chief Executive Kenyon joining   rival club  Chelesa.
The roots  of these changes are in shift of values  and beliefs.

Values – have clearly shifted towards a more commercial agenda.
Beliefs – The time honoured religious metaphor for football – or rather how it used  to be.

Actions of Beckham, Ferguson and Kenyon has a  reason of shift in cause of the game. Early in 1990 and   professional football was played for the benefit of supporters profit is only a means to an end. Today it is a big business.

A reasonable set of alternative assumptions for the early years of the new century could reasonably be postured:
Professional football is played because it is a core product  profit is essential but reinvestment in players might give longer term benefits. Television is an integral part of the game today offering sponsorship and brand recognition potential  football should be professionally managed. It does not matter who invests in the club or which players are employed by the club so long as it is successful.

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