Management

The four elements in Malcolm Glazer’s Manchester United strategy

Malcolm Glazer, the (in)famous owner of Manchester United and the Tampa Bay Buccaneers, died on 28 May 2014 at age 85 from complications related to a stroke he suffered in 2006 (ESPN). Since I have always been interested in Mr Glazer’s keen sense for doing business in the sports industry, I will dedicate this post to him and look at the elements of his strategy in regard to Manchester United. I will use a model by Robert M. Grant explained in his book ‘Contemporary Strategy Analysis’ (2008).

Mr Grant depicts the success stories of Madonna (pop singer), Lance Armstrong (sportsman), and the Vietnamese military, and claims that ‘For none of these three examples can success be attributed to overwhelmingly superior resources. … Nor can their success be attributed either exclusively or primarily to luck. (2008: 5)’ In addition, according to Mr Grant, in all three success stories, four common factors stand out:

  1. Goals that are simple, consistent, and long term;
  2. profound understanding of the competitive environment;
  3. objective appraisal of resources; and
  4. effective implementation (2008: 7-9).

1) Goals that are simple, consistent, and long term

According to Seth Godin, “people who get things done, who lead, who grow and who make an impact… those people have goals. (Seth Godin Blog 2009)” In the case of Malcolm Glazer and Manchester United, delivering on the vision of exploiting the clubs commercial potential to the maximum was the central strategy and ultimate goal for achieving success in the Premier League and on a global scale (Telegraph 2013).

Peter Millward (2011) underlines A.K. Kerr (2009), who ‘convincingly unpacked the concept of football brands to show how they build and retain equity through team-related antecedents (such as on-the-field success, star/charismatic players and potentially head-coaches), organization-related antecedents (for instance a team’s presence in a league which has a strong market profile, the stadium of the arena, a team sponsor, club’s reputation and history of the club’s logo) and market-related antecedents, which include preferences for particular sports in global geographic regions. Elaborating on Kerr’s concept, Bovet and Chanavat (2010) mention Hill and Vincent (2006), who noted that Manchester United have launched numerous operations such as the establishment of foreign outlets to sell branded football-related and non-related products, building relationships with other global brands, the participation to Asian-based tournaments and tours, website promotions, the development of soccer school as well as the recruitment of South-Asian players that can be considered as a marketing operation on the core product.

The above-mentioned marketing activities brought clearly stated goals with them and according to Paul Kelso, “Eight years on the strategy can be declared a resounding success. In 2005, United’s commercial revenue was £48.7 million. [In 2012] it stood at £117.6 million. (Telegraph 2013)”

2) Profound understanding of the competitive environment

Michael E. Porter (1996: 64) assesses that “Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.” Manchester United underline that thought on their investor relations site by stating, “We aim to increase our revenue and profitability by expanding our high growth businesses that leverage our global community and marketing infrastructure. (manutd.com 2014)” The club lists the following 5 key elements of their strategy:

  • Expand our portfolio of global and regional sponsors;
  • further develop our retail, merchandising, apparel & product licensing business;
  • exploit new media & mobile opportunities;
  • diversify revenue and improve margins;
  • enhance the reach and distribution of our broadcasting rights (ibid).

In terms of global and regional sponsors, Manchester United includes companies from many different parts of the globe with Aon (UK), Honda (Japan), DHL (USA), Singha beer (Thailand), Zong (Pakistan/China), etc. (manutd.com 2014). Such partnerships foster the development of retail, licensing and broadcasting opportunities in their partners’ regions. Eventually, such activities can result in diversifying revenue and improving margins; which is exactly in the vain of Mr Glazer’s ‘vision of exploiting the clubs commercial potential to the maximum’. The following map by talkSPORT shows all 33 Man United sponsors in 2013, proving the club’s global domination (talksport.com 2013):

Map proving Man United's global domination: all 33 sponsors' HQ locations

Source: talkSPORT.com

Millward (2011) depicts how Mellor (2000) and King (2003) have argued that Manchester United has been the leader among European football clubs in building a global brand ‘as a way of raising revenues through increasing merchandising incomes.’ Edward Freedman once pointed out ‘that as recently as 1990, Manchester United replica shirts were not available to buy in Scotland and parts of south-east England (Bose 2007: 86 in Millward 2011).

BrandFinance Football 50 (2013: 20) attributes the successful Manchester United venture of Malcolm Glazer and his family to their extensive US sporting experience and explains, “Even before acquiring Manchester United in May 2005 the Glazers knew that it was not just a business, not just a football club, but a brand. They set out with a clear strategy to invest and have achieved exponential returns on this investment.”

3) Objective appraisal of resources

Tim Krabbenbos (2013) recounts that ‘In 2005 the Glazer family, purchased Manchester United and de-listed it from the stock exchange (Reuters, 2012). The Glazer family carried out a ‘leveraged’ buyout of the club. They borrowed the money to purchase the club and after the acquisition moved an important amount of the debt on the balance sheet of the club. The future revenues of Manchester United are utilized to finance their own acquirement of the club. Considering that Manchester United used to have a reputation for having no debts, this development was an important change.’

Supporters believed that Mr Glazer’s funding strategy to buy United was bad for the previously debt-free club (BBC News 2005). Eight years after the takeover, United’s debt at 30 June 2013 was still £389m, ‘only’ down £136m from the £525m the £525m the American family borrowed to buy the club (Guardian 2013). On the upside, United’s income grew to a record £363m in 2013 (ibid).

In terms of sponsorship, it is noteworthy that Manchester United was able to monetize their brand assets by signing a record-breaking seven year, $559 million shirt deal with Chevrolet kicks in this summer (Forbes 2014). Furthermore, United’s kit deal with Nike ends in June 2015 and gives way for a new sportswear manufacturer to offer their services to the legendary brand. It has been reported that German sportswear company Adidas is in line to secure a world-record kit deal with Manchester United worth £600 million, which would be a considerable upgrade from the current £25.4 million-a-year deal with Nike that began in 2002 (Bleacher Report 2014). In addition, in 2013, the club signed an eight-year partnership deal worth approximately $240m with insurance broker Aon, who sponsor Man United’s training ground and kit (New Statesman 2013).

4) Effective implementation

Malcolm Glazer clearly had a plan when he bought the first 2.9 percent stake in Man Utd in March 2003, and he executed that plan rigorously in years to come. Cater and Pucko (2010) give an overview of the most important activities for successful strategy implementation, which includes four group activities: planning, organizing, leading, and controlling.

Timeline of the Manchester United takeover

Timeline of the Manchester United takeover. Source: BBC News

Planning activities: In the aftermath of the takeover, it seems that Mr Glazer had an obvious plan to take over the Manchester club, even though he mentioned in March 2004 that he had “no current intention” to make a bid for the club. Nevertheless, the process looks thoroughly crafted and well implemented.

Organizing activities: According to Cater and Pucko (2010: 212-3), an integral part in organizing an effective strategy implementation is allocating strict responsibilities. Besides appointing his six children to the board of Manchester United, Mr Glazer promoted Edward Woodward as the Chief Executive to complete the ‘Glazerfication’ of Old Trafford (Telegraph 2013). Paul Kelso wrote that the top job at Old Trafford represents Edward Woodward’s inheritance, which originates from his employment at JP Morgan, where he engineered the £500 million of debt that funded the Glazer’s takeover of Man Udt (ibid). With the announcement of Mr Glazer’s passing away, the Buccaneers website stated, “Mr. Glazer’s long established estate succession plan has assured the Buccaneers will remain with the Glazer family for generations to come. Linda Glazer, along with their five sons and daughter, will continue to own and operate the team as they have throughout the family’s ownership. (Buccaneers 2014)”

Leading activities: Mr Glazer’s own NFL club, the Tampa Bay Buccaneers, described him as a dynamic business leader, who helped mold the Buccaneers into a model franchise and one respected league-wide (Buccaneers 2014).  As Brooks Peck so eloquently put it, “In the U.S., [Malcolm Glazer] is remembered as a personable pioneer who turned a financially troubled laughingstock of a franchise into Super Bowl winners bonded with their local community. (Yahoo! Sport 2014)” However, in Europe, Mr Glazer didn’t make many friends amongst Manchester United supporters by putting a humongous amount of debt on a previously financially sane club. Nonetheless, from the time he acquired the prestigious Premier League asset in 2005 for a value of $1.4 billion, the club’s worth rose to $2.4 billion under Mr Glazer’s leadership (Forbes 2014).

Controlling activities: Many companies apply a balanced scorecard to keep track of progress. I wish I knew how the Glazer’s control their activities in order to write it here, but I simply don’t and I couldn’t find any literature for this. Therefore, I will just leave this point blank. If any of you find out more on this topic, please let me know, either here in the comment section or through Twitter at @sebinomics.

IMHO

Malcolm Glazer might have been described a villain by some Manchester United supporters for bringing a more capitalist mentality to the club’s board. On the other hand, in the US, he picked up a team that was never thought to be challenging for the top spot in the NFL and finally brought the trophy home. I see Mr Glazer as a business man with a strong sense of knowing what is best for the sports brand he works for, or with. Sometimes that is not necessarily what’s thought to be best for all stakeholders – as in the case of Man United supporters. However, I claim that a strong leader cannot please everybody all the time and needs to make choices, while being aware that at least one stakeholder group will disapprove that decision. That can also be observed with great minds such as Apple’s late founder Steve Jobs, who was said to be ‘one of the most egocentric’ entrepreneurs (Businessweek 1988), but ended up becoming the perfect leadership example for business leaders all around the globe.

In my opinion, in the case of Manchester United, Mr Glazer did a good job strengthening the value of the brand, which today is worth $2.4 billion. I don’t know if the company really needed to be thrown into dept for that to happen or if it would have worked without – food for your thoughts. Nonetheless, Mr Glazer did a great job with the Buccaneers, bringing a good sense of business acumen to Tampa Bay and finally a trophy. I definitely admire Malcolm Glazer’s unstoppable drive in crafting business plans and implementing appropriate strategies to make his visions come true.

RIP Malcolm Irving Glazer (August 15, 1928 – May 28, 2014)

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