Management

Manchester City FC as a «Question Mark» in the Boston Consulting Group’s Growth-Share Matrix

MCFC as a Question Mark in the BCG matrix

Today’s post will analyze how the brand of Manchester City FC (MCFC) performs in regard to the top 10 clubs of the Deloitte Football Money League. We will use the Boston Consulting Group’s (BCG) growth-share matrix that depicts, where Manchester City FC stands within the top 10 clubs in regard to market growth (limited to the top 10 clubs in the Money League) and MCFC’s relative market share.

Market growth rate

We define the total market size as the total revenue for the 2013/14 season of the top 10 clubs mentioned in the Deloitte Football Money League 2014, 2015 respectively. The Deloitte paper states that ‘the authors have used the figure for total revenue extracted from the annual financial statements of the company or group in respect of each club, or other direct sources, for the [respective] season (unless otherwise stated); revenue excludes player transfer fees, VAT and other sales related taxes; in a few cases they have made adjustments to total revenue figures to enable, in their view, a more meaningful comparison of the football business on a club by club basis (Deloitte Football Money League 2015:8)’. For the purpose of this article, the market size season 2013/14 is €4,260.7, the market size season 2012/13 is €3,695.1.

Mullins et al. (2006:85) explain that the traditional model of the BCG approach ‘analyses the impact of investing resources in different businesses on the corporation’s future earnings and cash flows. … The vertical axis indicates the industry’s growth rate and the horizontal axis shows the business’s relative market share.’ This means for our model, the market growth rate is 15.3%, which can be calculated as follows:

Market growth rate = ((Total market size 2013/14 – Total market size 2012/13) / Total market size 2012/13) x 100 = ((€4,260.7 – €3,695.1) / €3,695.1) x 100 = 15.3%

Relative market share

The horizontal axis sees the brand positioned in regard to its relative market share, which for the season 2013/14 equals to 75.4%, and 60.9% for season 2012/13 respectively. This equates to a 23.8% relative market share growth. The calculation goes as follows:

Relative market share = MCFC revenue / Top competitor revenue = €414.4 / €549.5 = 75.4%

Manchester City FC is a «question mark»

This analysis shows that the MCFC brand is what BCG would call a question mark. According to Philip Kotler (2002:95), question marks are “businesses that operate in high-growth markets but have low relative market shares. A question mark requires a lot of cash because the company has to spend money on [personnel and infrastructure] to keep up with the fast-growing market, and because it wants to overtake the market leader. The company has to think hard about whether to keep pouring money into this business.”

In our context, Mr Kotler is only partially right. Firstly, we can observe that MCFC’s relative market share grew 23.8%. Secondly, “Chief Executive Officer Ferran Soriano, supporting the thoughts of the Chairman points to “a new level of financial sustainability” and outlines that not only has the Club halved losses for three consecutive years, but that it has budgeted for a profit in 2014-15 and the club expects to be entering the 2015-16 season with no outstanding sanctions or restrictions. (mcfc.com, 3 December 2014)”

Manchester City FC crest on training shirt 2013/14This shows that MCFC is moving to the left of the chart towards the stars quadrant. Mr Kotler (2002:95) describes stars as, “the market leaders in a high-growth market. A star does not necessarily produce a positive cash flow for the company. The company must spend substantial funds to keep up with the high market growth, and to fight off competitors’ attacks.” The way our example is set up, there can only be one star. MCFC would have to produce at least the same amount of revenue as the number 1 club. In addition, the market growth rate would have to be at least 10%, according to BCG – we adopt the 10% mark for simplicity reasons and because it seems to be a reasonable figure for this example.

If MCFC would succeed and become a star, but the market growth rate would fall below 10%, MCFC would become what BCG calls a cash cow. Mr Kotler (2002:95) defines cash cows as, “Stars with a falling growth rate that still have the largest relative market share and produce a lot of cash for the company. The company does not have to finance expansion because the market’s growth rate has slowed. … The company uses cash cows to pay bills and support other businesses.”

In case the market would slow and MCFC would lose its market leader position, the brand would become what is known as a poor dog. If this were to happen, “the company should consider whether it is holding on to the business for good reasons (such as an expected turnaround in the market growth rate or a new chance at market leadership. (Kotler, 2002:95)” The traditional BCG approach would suggest to get rid of poor dogs. In my personal opinion, in this context, a poor dog brand should be kept and, with a long-term strategy, moved to the left of the chart, closer to the cash cow quadrant.

In conclusion

It can be stated that the European football market, as depicted by the Deloitte Football Money League, seems to keep growing healthy for the next few years given the popularity of the Premier League, German Bundesliga, and the UEFA Champions League. If Manchester City FC stays on track with their global business model, which sees their owners – City Football Group – fully or partially owning different football clubs in key developing football regions, the MCFC brand might keep its status as a questions mark, but move closer towards becoming a star.

City Football Group's fully or partially owned clubs

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