Footballpreneurship1464853/... · 2020. 9. 8. · Term: Footballpreneurship The role of scouting...
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Footballpreneurship
The role of scouting and youth academies in football
entrepreneurship and value creation from young
talents: A case study on AFC Ajax and Borussia
Dortmund
Master Thesis, 30 credits
Author: Aydin Can Firildak, Hakan Akin
Supervisor: Anna Alexandersson
Examiner: Malin Tillmar
Term: Spring 2020
Subject: Business Administration
Level: Advanced level
Course code: 5FE060E
Abstract
Background: The football industry has been rapidly evolving. The value of
transfer market has increased astronomically, thus sealing a transfer deal has
become pricy. In the meantime, the gap between rich and low budget clubs
keeps increasing. UEFA released new regulations called “Financial Fair Play”
(FFP), which aims to curb financial differences amongst football clubs. Hence,
football clubs adopted new entrepreneurial approaches such as scouting and
youth academies to improve their financial situation.
Purpose: The main objective of this paper is to understand football teams’
entrepreneurial reaction towards FFP. The purpose is to examine the strategies
of value creation from human capital like talented young players, in terms of
scouting and youth academy, and explain the relationship between football and
entrepreneurship in context of the business model framework.
Method: The research is conducted by secondary data collection through
online resources. We used the secondary data analysis method to analyze our
data and carried out a representative case study based on the theoretical
framework of this master thesis on two football clubs, AFC Ajax and Borussia
Dortmund, to understand the problem more comprehensively.
Conclusion: The results of this study demonstrate that the FFP regulations
affected the entrepreneurial structure of football clubs. The data suggest that
both clubs intensified their scouting and youth academy activities, as a result
they generated more transfer revenue through selling the players that they
recruited at their youth academies or scouted. Hence, this new entrepreneurial
approach that the football clubs adopted provided a significant benefit for
them. We call this concept that football meets entrepreneurship as
“Footballpreneurship”.
Keywords: football entrepreneurship, business model, sport entrepreneurship,
youth academy, scouting, human capital
List of Abbreviations
EPL – English Premier League
FC – Football Club
FFP – Financial Fair Play
FIFA - Fédération Internationale de Football Association
UEFA – The Union of European Football Associations
Acknowledgments
We would like to express all our acknowledgements to certain people for their
contribution to our thesis. Firstly, we would like to express our gratitude with
all respect to our tutor Anna Alexandersson, who has guided us through the
entire semester with her worthy inputs. We would not achieve this without
your support.
Secondly, we would like to thank our examiner Malin Tillmar and our fellow
classmates for providing constructive comments to improve our thesis.
Lastly, we would like to present our endless thankfulness to our families, who
made us become Linnaeus University graduates possible. Without them, we
could not be here and write this thesis.
Sincerely,
Hakan Akin and Aydin Can Firildak
17th of August 2020
Table of contents
Introduction 1
1.1 Background 1
1.2 Problem Statement 6
1.3 Purpose 7
1.4 Research Questions 8
1.5 Outline 9
Methodology 10
2.1 Research Strategy 10
2.2 Research Design 11
2.3 Research Method 12
2.4 Data Collection 13
2.5 Data Analysis 16
2.5.1 Secondary Analysis 16
2.5.2 Case Study 17
2.6 Research Credibility 18
2.7 Ethical Considerations 19
2.7.1 Copyrights 19
2.7.2 Data Management 19
2.8 Summary 20
Theoretical Framework 21
3.1 Business Model 21
3.2 Sport Entrepreneurship 30
3.3 Porter’s Five Forces Framework 31
3.4 Human Capital 35
3.5 Summary 36
Results 37
4.1 Borussia Dortmund 37
4.1.1 Shareholder Structure 37
4.1.2 Revenue Structure 38
4.1.3 Transfer Data 40
4.1.4 Social Media 42
4.1.5 Secondary Interviews 43
4.2 AFC Ajax 46
4.2.1 Shareholder Structure 46
4.2.2 Revenue Structure 48
4.2.3 Transfer Data 49
4.2.4 Social Media 50
4.2.5 Secondary Interviews 51
4.1 Brand Value of the European Leagues 54
Analysis 55
5.1 Borussia Dortmund 55
5.1.1 Business Model 55
5.1.2 Sport Entrepreneurship 58
5.1.3 Porter’s Five Forces Framework 59
5.1.4 Human Capital 59
5.2 AFC Ajax 61
5.2.1 Business Model 61
5.2.2 Sport Entrepreneurship 64
5.2.3 Porter’s Five Forces Framework 64
5.2.4 Human Capital 65
Discussion 66
6.1 Significance of Youth Academies in Value Creation 67
6.2 Significance of Scouting and Human Capital 67
6.3 Significance of Club Structure 68
6.4 Significance of Sport Facilities 69
Conclusion 70
7.1 Key Findings 70
7.2 Limitations 71
7.3 Recommendations for Future Research 72
Timetable 73
References 74
9.1 Online references 80
Table of Figures
Figure 1: Outline of the thesis ...................................................................... 9
Figure 2: Secondary data collection ............................................................ 14
Figure 3: Literature collection .................................................................... 15
Figure 4: 10 Criteria of Credibility ............................................................. 18
Figure 5: Summary of Methodology ........................................................... 20
Figure 6: Summary of Theoretical Framework ........................................... 36
Figure 7: Shareholder Structure (Borussia Dortmund) ................................ 38
Figure 8: Revenue percentage for 2018-19 (Borussia Dortmund) ............... 39
Figure 9: Revenue in Euro (x1000) (Borussia Dortmund) ........................... 40
Figure 10: Last 5-year Transfer Report (Borussia Dortmund) ..................... 41
Figure 11: Eleven most profitable transfers (Borussia Dortmund) ............... 41
Figure 12: Social media (Borussia Dortmund) ............................................ 42
Figure 13: Shareholder structure (AFC Ajax) ............................................. 47
Figure 14: Sales per Businesses (AFC Ajax) .............................................. 48
Figure 15: Revenue from departed transfers (AFC Ajax) ............................ 49
Figure 16: Eleven most profitable transfers (AFC Ajax) ............................. 50
Figure 17: Social media (AFC Ajax) .......................................................... 50
Figure 18: Brand value of top tier European football leagues in 2019 ......... 54
Figure 19: Timetable .................................................................................. 73
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Introduction
This section introduces a background to the thesis with key concepts
definitions to give better understanding to readers about the research. It is
followed by the problem statement, where it answers the following question of
“why is this context worth studying?”. Purpose is given to introduce the
authors’ aims and intentions on doing this thesis. Lastly, research questions
close this part, given with a couple of questions that are answered by authors
throughout this thesis.
1.1 Background
The authors will describe some main concepts regarding the thesis. Various
resources are used to back up authors’ current knowledge on these concepts.
References from these sources harmonized authors’ knowledge and shaped the
background.
Entrepreneurship is the discovery, evaluation, and exploitation of
opportunities for the creation of future goods and services (Shane and
Venkataraman, 2000). According to Ratten (2010, cited in Radaelli et al.,
2017, p.72) sport entrepreneurship is about innovation and risk-taking
behaviors to discover and exploit new markets, product opportunities and
human capital. Another definition indicates that, sports entrepreneurship is a
field of research that focuses on the contributions of sport organizations in line
with the decisions made by communities, organizations, and individuals
(Radaelli et al., 2017). The history of sports entrepreneurship goes back a long
way. Porter and Vamplew (2018) state that, until the ancient Greeks and
Romans, athletes competed for only their honor, without any profit-making
purpose. Afterwards, sports became a business over time. Towards the end of
the 19th century, the teams in North East England turned the clubs into
businesses to compete with other teams (Porter and Vamplew, 2018, p.633).
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According to Porter, who investigated two centuries of sports entrepreneurship
history, sport is always connected with the business, and it has evolved over
time to identify itself as business (Porter and Vamplew, 2018, p.630).
“In the rapid changing global business environment, innovation and change
is a fundamental focus of sport.” (Ratten, 2010, p.57). Nowadays, every sector
is influenced by the technological and scientific development, which affects
the sports industry as well. In the sport industry, where the competition is high,
developments have affected each branch and have led to a difference on their
approach. Sport games are considered highly competitive, so club teams are
forced with different understanding to get ahead of others. Professional
sportive competitions create a unique environment for developing
entrepreneurship theory, because clubs are to explore and use opportunities to
compete, survive, grow and win (Radaelli et al., 2017, p.70). As stated in Dietl,
Franck and Lang (2008, p.353), economy is one of the important features that
draw a distinction between teams in professional sports. The economic success
of clubs affects their sportive success, which increases the gap between
average and high-earner teams.
Developments in the sports industry in recent years, have particularly affected
the football industry. The football industry is influenced by these
developments on two main trends, commercialization, and professionalization
(Enjolras, 2002, cited in Forslund ,2016, p.374). In recent years, the fact that
the football world has been rapidly evolving from a sport to an industry is an
indicator (Dolles and Söderman, 2013). Many football teams in Europe started
to be targets for investors after football developed quickly and clubs started to
produce high income (Birkhäuser, Kaserer and Urban, 2017). One of the best
examples of commercialization in football, Roman Abramovich (Russian
businessman), who bought Chelsea F.C. (an English professional football
club) in 2003, has invested a tremendous amount of money in the club. The
assets such as broadcasting rights, merchandising, season tickets, transfer
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revenues and branding, which are obtained by professional football teams,
encourage initiative. As clubs’ revenues from fans and followers increase,
football becomes a growing market over time, as in the case of Abramovich.
This yields football into a more commercial dimension, such as with the new
multi-billionaire owners of Manchester City F.C (an English professional
football club) and Paris Saint-Germain F.C. (a French professional football
club).
With the new game-changing club owners and development of the industry,
the football market has also started to evolve. Transfer fees of players have
reached astronomical figures. The purpose of all clubs is to have the best
football players, and to participate in the UEFA Champions League, which is
also known as the European Cup (the highest tier tournament in Europe), and
to be successful there. The Union of European Football Associations (UEFA)
distributes a certain amount of money from the “market pool” to the
participating teams, and according to various criteria such as the television
market of these teams and other factors (Plumley and Flint, 2015, p.247).
Football teams aim to create the strongest squad, become winners, increase
their prestige, and strengthen economically. Clubs spend huge amounts of
money to gather the best and the most talented players and to be the winner at
the end of the season (Ascari and Gagnepain, 2010). Abramovich’s first season
in Chelsea F.C. (2003/2004) spent 169.70M Euro of transfer fee within a year
(Transfermarkt.co.uk, 2020). Manchester United, which was one of the biggest
English professional football teams in those years and finished the previous
season (2002/2003) as the English Premier League (EPL) champion, spent
56.53M Euros on transfer in that season (2003/2004) (Transfermarkt.com,
2020). This led to an increase in the gap between big teams and medium-sized
teams.
UEFA executive committee created the Financial Fair Play (FFP) concept in
2010 to prevent the worsening financial conditions and imbalance in European
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club football (UEFA, 2020). Additionally, it was updated according to the
changes in the football environment periodically in 2012, 2015 and 2018,
based on principles and objectives remaining the same. The general objectives
of this rule are:
“to further promote and continuously improve the standard of all
aspects of football in Europe and to give continued priority to the
training and care of young players in every club”
“to adapt clubs’ sporting infrastructure to provide players, spectators
and media representatives with suitable, well-equipped and safe
facilities”
“to improve the economic and financial capability of the clubs,
increasing their transparency and credibility”
“to encourage clubs to operate on the basis of their own revenues”
“to encourage responsible spending for the long-term benefit of
football”
“to protect the long-term viability and sustainability of European club
football” (UEFA, 2020, p.2).
With this regulation it was aimed to close the gap between the large and mid-
sized clubs. According to this rule, the big clubs cannot transfer only by paying
plenty amount of money. In fact, there should be a balance in the transfer price
between the players they sell and buy. These rules pushed football teams to
invest in cheap and young football players or their facilities to recruit their own
players to bring into balance.
Many clubs have to create a new model on these developments within football.
The goal is to create a proper plan and suit it to the club interests. The
financially conservative teams follow a supplier model to big clubs and try to
take advantage of rich clubs’ desire for talent players (Andreff, 2006, p.692).
After increasing player prices, it has become important to discover and train
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young players (Dolles and Söderman, 2013). Young players from all over the
world have increased in importance for football teams in Europe and have had
consequences for recruitment and development strategies for clubs that play
an important role in their competition (Bullough and Coleman, 2019). For
example, FC Nantes (a French professional football club) and AJ Auxerre (a
French professional football club) generated a significant source of income
from the sale of young players to other clubs, so they are considered the
suppliers of players in Europe (Andreff, 2006). This created a “long-term”
model for these clubs because they raised their own players and enabled them
to sustain their financial situation (Söderman, 2013). Söderman (2013, p. 168)
likens clubs’ player recruitment to the sale of semi-finished products in the
biotech industry. For example, David Beckham first signed an internship
contract with Manchester United in 1991, and in 2003 signed a 4-year contract
with Real Madrid worth 35M Euro (Dolles and Söderman, 2013). Such
examples have encouraged other clubs to give the same importance to
infrastructure. Many clubs have begun to structure the youth academies more
professionally, such as medical and sports science support, administration, and
education (Dolles and Söderman, 2013).
In the football transfer market, football teams review talented players to
become more competitive (Andreff, 2006, p.695). In addition, according to
Andreff (2006) they earn more money from these players and increase their
chance to participate in a European competition. This caused teams to create a
new system. Therewith football teams invest millions of euros in the scouting
system to discover talented players and retain them before their competitors
(Radaelli et al., 2017, p.71). Porto FC (a Portuguese professional football
team) is one of the best teams applying scouting transfer in Europe, which
gained £538.25M from scouting transfer between 2007/2008 and 2017/2018
seasons (Graves, 2020).
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1.2 Problem Statement
Here in this section, authors define element(s) worth research in this thesis. In
other words, authors are hereby to answer the following question of “What is
the problem that needs to be identified?”. This section is the definition of the
problem to be further researched.
Ascari and Gagnepain (2010) define football leagues as nationwide contests
that contain several clubs competing against each other within a specific
period. The reasons why football teams win or lose, profit or loss, are related
to the differences between the clubs and their different levels of performance
on the pitch and the strategy they have developed and how they are managed
(Dolles and Söderman, 2013).
Although football teams want to create the best team, though spending vast
amount of money, their incomes and expenses must be balanced, due to the
FFP regulations. In addition to this regulation, a football team has the right to
transfer as much as the profit it receives from a player they sell (UEFA, 2020).
This obligation causes football teams to turn to least costly undiscovered
football players. Thus, the youth academies and scouting become strategic for
football teams.
In fact, clubs (or their decision-makers) are driven to use their resources
efficiently and create value out of that. This approach brings entrepreneurship
as an option for clubs. Hence, entrepreneurship is embraced by the executive
of football teams to solve their financial problems and increase their incomes.
At this point, players take an important place in the football organization
because developing and exploring football players allow their clubs to vary
from their competitors. The performance of football teams and the evaluation
of the teams represent the interventional cycle in football organizations
(Radaelli et al., 2017).
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Football teams, with or without financial struggles, are driven to generate new
ways of income. Football teams began to research and develop less costly
models to close the gap between economically strong teams. This thesis will
examine how football teams produce a solution against the change in the
football industry.
1.3 Purpose
The authors state their motivation of focusing into the topic of
“Footballpreneurship”. The authors reason their intention for the research.
In other words, this section stands for the definition of their purpose and
messages that they are expecting to give to readers.
This paper will investigate the entrepreneurship and value creation from
human capital in the context of youth football academies and scouting
activities. Accordingly, everything belonging to a football team is considered
as assets by the authors, especially football players. Football players are the
most important assets of football teams, and a player may become professional
after being recruited at a youth academy or may be scouted by a club.
Eventually, the young player who is talented can be a source of income for
clubs.
A comparative analysis on two different football teams, AFC Ajax, and
Borussia Dortmund, is carried out to achieve the objectives of this master
thesis. One of these teams, AFC Ajax, is famous for the youth academy; while
the striking feature of Borussia Dortmund is its scouting system that
discovered numerous talents. The purpose of this comparative analysis is to
understand the problem of this master thesis and achieve its objectives through
answering the research questions that are stated as following.
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Objectives:
1) Understanding the role of scouting and youth academies in European
football teams in terms of creating economic value out of young
talents.
2) Comparatively analyzing the approaches of two different European
football clubs to young player recruitment through scouting activities
and youth academies, in the case of AFC Ajax and Borussia Dortmund.
3) Assessing the entrepreneurial patterns of football clubs in the context
of business model.
1.4 Research Questions
There are two research questions given, which shapes the whole research
process to answer it in this thesis. Answer to these questions shaped through
various research methods that will be described in the next sections in detail.
The following RQs are formulated to achieve the objectives of this master
thesis.
1) How did the regulations on football clubs such as Financial Fair Play
affect the business patterns of European football clubs? (Responses to
O1, O3)
2) How did different entrepreneurial approaches impact the club
structures of AFC Ajax and Borussia Dortmund in the context of value
creation? (Responses to O2)
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1.5 Outline
Chapter 2
• Methodology• This section contains selected research methods for the thesis
Chapter 3
• Theoretical Framework
• This section presents theoretical framework regarding to Footballpreneurship
Chapter 4
• Results• There is an presentation of the collected data
Chapter 5
• Analysis• This chapter interprets collected data under given theories
Chapter 6
• Discussion• This chapter summarizes the analysis with authors' own
implications
Chapter 7
• Conclusion• This chapter answers the reseach questions
Figure 1: Outline of the thesis (own implications)
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Methodology
This section outlines authors’ research under four chapters. Starting with a
description of two main research strategies obtained as basis. Followed by
research design, defining the way of how three main approaches shape the
thesis. ‘Data Collection’ and ‘Data Analysis’ parts conclude the
‘Methodology’ section by giving an insight about authors’ ways of collecting
and analyzing data. This thesis is based on secondary data, so there is no data
sampling method has been followed.
2.1 Research Strategy
Quantitative research is identified as a research method, which highlights
quantification and analysis of numerical data collected (Bryman, 2012). The
ability of interpreting mathematical graphics, comes out from results, can be
possible by quantitative research. This research method is adopted due to its
significance for interpreting secondary data. In the light of quantitative data,
authors would be able to understand and analyze the graphical and numerical
data presented in the results chapter.
Quantitative researches are characterized as engrossed with implementing
measurement steps to social life whilst qualitative researches are active in
words to present society analysis (Bryman and Bell, 2015). Each research from
two strategies mainly concerns different perspectives. However, at the end of
the day, two strategies are common at interpretation of visual data (Bryman
and Bell, 2015). In terms of engaging with numbers, this research interacts
with numerical secondary data; thus, authors will perform a quantitative
research.
Qualitative research is considered as a research strategy that underlines
qualification and analysis of verbal data obtained (Bryman, 2015). The
capability of interpreting published interviews comes from qualitative
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research. In this research, qualitative data collected from related interviews,
which are supportive to numerical data analysis. This research strategy is
embraced due to the need of interpretation of published interviews.
Bryman (2012) states that qualitative research is consistently correlated with
theory generation. As it is stated, the thesis has concluded with the authors’
opinions, which are results of an approach that is shaped in the authors' mind.
There is no quantification in the qualitative research; thus, authors will benefit
from this approach for the collection of published interviews. Inputs from
published interviews will be reduced depending on usage, as qualitative
research concerns about data reduction of large scales of data (Bryman and
Bell, 2015).
Authors embody a qualitative approach along with its counterpart, quantitative
approach. In this sense, these two opposite approaches are considered as two
puzzle pieces that complete each other. For instance, empirical material
contains both numerical and verbal data, which requires two different
approaches at the same time. As previously mentioned, interviews do not have
quantification, and graphs do not have qualification.
Correspondingly, there are qualitative and quantitative data included in the
results chapter; where quoted interviews represent ‘qualitative’, and rest of the
graphs represent ‘quantitative’ data. The presence of two different data types
obliged to have multiple research strategies at the same time. For this reason,
qualitative and quantitative methods are defined under this section. Therefore,
their usage together shapes this thesis’ research strategy as “Mixed Methods’.
2.2 Research Design
Abductive logic sparked upon the necessity when inductive and deductive
logics are insufficient on certain points. Abductive logic answers the question
of ‘what it might be’, so it approaches problems from a creative perception.
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Dunne and Martin (2006, p. 518) indicates that “The designers who can solve
the most wicked problems do it through collaborative integrative thinking,
using abductive logic, which means the logic of what might be.” Abductive
approach is considered as a problem-solving tool for designers to solve wicked
problems or create something that does not exist. “Whereas a designer uses
abductive reasoning to say, ‘What is something completely new that would be
lovely if it existed but doesn’t know?’” (Dunne and Martin, 2006, p. 514). On
the other hand, abductive data is a bridge between the two ways of thinking.
Martin (2009, p. 29) indicates that “…abductive logic sits squarely between
the past-data-driven world of analytical thinking and the knowing-without-
reasoning world of intuitive thinking.”
In the light of abduction, this research does not start (nor end) with a
hypothesis. For this reason, this research does not aim to confirm a hypothesis;
nor, authors do not aim to reach to a hypothesis. Apart from these, authors
obtain abductive reasoning to find “What it might be?”, rather than “True or
False”. As abductive reasoning does not declare a conclusion to be true or
false, it posits the potential true (Martin, 2009). According to the outline of
thesis, there is a ‘discussion’ given in place at the end of the theoretical
analysis, where authors indicate the possible true with their personal
understanding. Hence, this thesis consists of a research question, and authors
aim to answer the research question throughout the theoretical analysis of
given empirical data.
2.3 Research Method
As Dunn et al. (2015) indicates, secondary data consists of longitudinal data
with large sample sizes, which commonly increases findings’ generalizability.
For this reason, secondary data provide authors to access large amounts of data
to validate certain theories during the research. Hence, this study mainly
utilizes the relevant secondary data about the subject.
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Obtaining secondary data as a research method is an asset for this study in
terms of benefiting from past researchers who worked on the similar topic.
Dunn et al. (2015) mention that strength of secondary data comes from
variables and relationship among them; which may have not been analyzed
before can be interpreted and may lead to significant results as an enhancement
of previous research(-es).
Borders of the research sample are drawn by the authors as European football,
so circumstances will be considered under European football settings.
Drawing the borders of the research scope improves our understanding, which
is substantial when choosing useful variables for the analysis and results
interpretation (Goode et al., 2016).
Moreover, as secondary data will be used, this can also shed a light for future
researchers. In other words, using secondary data is an important opportunity
to determine certain errors and missing data from previous research (Goode et
al., 2016).
Consequently, this paper also aims to reveal missing aspects under the football
entrepreneurship context, so these gaps can be filled by future researches. In
results, quantitative and qualitative data are given as mentioned previously.
Despite of having two varieties of data, they are collected from various
sources, which make them “Secondary Data”. Therefore, secondary data
constitutes the sole research method of this thesis; and, defined deeply for this
reason.
2.4 Data Collection
For our research, it is necessary to collect multiple secondary data, such as
transfer expense/income, from multiple football teams. Goode et al. (2016)
underlines that having access to large sample sizes is considered as an
advantage when analyzing the results; which gets considerable when
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reviewing results. As it is referred, this study offers a wide variety of secondary
data to validate the conclusion of the study.
The secondary data searching for this research has defined in the table down
below:
Search Engine Keywords Hits
Google AFC Ajax 15,800,000
AFC Ajax youth
academy interview
899,000
AFC Ajax youth
academy
821,000
AFC Ajax annual
report
731,000
Borussia Dortmund 98,100,000
Borussia Dortmund
interview
29,400,000
Borussia Dortmund
scouting system
1,380,000
Borussia Dortmund
annual report
654,000
Sorting: Relevance
Time period: 2010-2020 (Outdated data are excluded)
Figure 2: Secondary data collection
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On the other hand, authors have benefited from various literatures, and
reviewed them to define specific theories. Thus, the table down below
describes the literature search process:
Database Keywords Filters Hits
OneSearch Sports
entrepreneurship
Articles,
Peer-reviewed,
English,
Entrepreneurship
1590
Football
entrepreneurship
Articles,
Peer-reviewed,
English,
Management,
Entrepreneurship
79
Five
forces
framework
Articles,
Peer-reviewed,
English,
Management,
Business
38981
Human capital Articles,
Peer-reviewed,
English,
Management,
Business,
Entrepreneurship
5491
Time period: 2010-2020 (Outdated data are excluded)
Figure 3: Literature collection from library databases
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2.5 Data Analysis
2.5.1 Secondary Analysis
Secondary analysis should be considered a serious approach to collect new
data (Bryman, 2012, p. 312). There are some advantages for using secondary
data for authors, that are cost and time, high quality data, opportunity for
longitudinal analysis, opportunity for cross-cultural analysis, more time for
data analysis and the wider obligations of the social researcher (Bryman,
2012). As Davis-Kean et al (2015) stated, secondary data analysis is consistent
on obtained data from other researchers and/or organizations; hence, the
subject (or “users”) are not participated in the study.
In secondary data, official statistics provided by football teams, or relevant
associations, are used. According to Bryman (2012, p. 320) “The use and
analysis of official statistics for purposes of social research has been a very
controversial area for many years. Agencies of the state, in the course of their
business, are required to keep a running record of their areas activity. When
these records are aggregated, they form the official statistics in an area
activity.”
The key point of using secondary data is the time efficiency, so this research
can be done in a more productive and time efficient way. Dunn et al (2015)
indicates that existing data analysis can be done in a shorter amount of time
and crucial research questions can be responded in the meantime. “Secondary
data analysis typically requires less time and monetary resources to conduct
as data sets are often obtained at minimal or no cost, data are readily
available and therefore take less research staff time, and there is no need to
provide incentives to study participants.” (Dunn et al., 2015, pg. 1297).
As the advantages of secondary data analysis indicated above, authors believe
that this approach is the most suitable. These days, top tier football teams in
Europe are unreachable and it is necessary to collect data from them. Thus,
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secondary data collection and analysis are chosen to use the time in the most
efficient way. Otherwise, this research will be incomplete while waiting for
these clubs’ responses.
2.5.2 Case Study
In this research, two types (shaped by authors) of football teams are chosen;
one uses its scouting system and one recruit its own players. Authors chose
Borussia Dortmund (uses scout system) and Ajax (recruits its own players) as
a suitable match for these two types. Through this case study, we aimed a
comparative analysis of these two clubs to address the objectives of this study.
Bryman (2012, pg. 110) defines ‘case’ as an “emphasis tends to be upon an
intensive examination of the setting”, which centers around a society or
organization. According to the references, a case study is a research that
studies a setting of a community and interprets its tendency.
Yin (2009) indicates five types of case: Critical, Extreme (Unique),
Representative (Typical), Revelatory, and Longitudinal. Representative case
suits the best among five types for our research; as it exemplifies a wide class
of which it belongs to (Bryman, 2012). The purpose in this type of case study
is to obtain key circumstances of a routine time period or a common area (Yin,
2009).
This thesis exemplifies AFC Ajax and Borussia Dortmund in two different
aspects of football teams: scouting and facilitation. Borussia Dortmund is
chosen as a representative of “facilitation”, whilst AFC Ajax is chosen for
“scouting”. Moreover, two sides of representative cases are shaped depending
on what they present. The case study is supported by empirical materials and
these materials are analyzed under certain theories, as the thesis is outlined.
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2.6 Research Credibility
Credibility is an important criterion used for measuring the research quality.
Research credibility is directly proportional with the reliability of data
sources. According to Conrad and Becker (2011), determining the
trustworthiness of a study, regardless from its funding, is the pivotal point of
any credibility problem.
On the other hand, Elliott (2013, p.924) underlines that “the credibility of a
study consists in the trustworthiness of the evidence reported by the study and
the extent to which the evidence actually supports the conclusions that are
drawn from it.” In this sense, evidence must be relevant to the study and
strongly support the conclusions that come out from the study.
Conrad and Becker’s (2011) ten criteria of research credibility (demonstrated
in figure 3) has been an important source for the authors to ensure carrying out
a credible research.
Figure 4: 10 Criteria of Credibility (Elliot, 2013, pg. 922: Conrad and Becker,
2011) (PI: Principal Investigator, CRO: Contract Research Organization)
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2.7 Ethical Considerations
2.7.1 Copyrights
Our responsibility, as authors, is to abide research ethics and pay respect to the
previous researchers. For this reason, copyright is a must that needs to be
underlined in the methodology. As this research is consistent with secondary
data, references and data are owned by different authors; the Harvard
referencing system is used to specify the sources of this study.
Bryman and Bell (2015, pg. 147) defines copyright as “an intellectual property
right that protects the owner of copyright from unauthorized copying.” Most
of the research materials, such as reports, publications and books, are protected
by copyright. (Bryman and Bell, 2015). For this reason, this paper warrants to
not violate any copyrights of research publications by following a reference
system.
2.7.2 Data Management
Collecting mass data for a research may raise questions about its management.
These questions regard the way of using data, or the way it's going to fit within
the context. “They raise questions about the extent to which information can
legitimately be used for research purposes that may be different from the
original reason for collecting data.” (Bryman and Bell, 2015, pg.146) As it is
referred, data management concerns the use of data in a legitimate way to
match with research purposes.
The thesis aims to contribute to the entrepreneurship subject specified under
the football industry. As Bryman and Bell (2015, pg. 146) indicates “...it is
increasingly common for researchers to be encouraged to make their data
available to the wider scientific community to that maximum potential benefit
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may be gained from.” We hereby serve future researchers, who will go further
within the same subject.
2.8 Summary
Research
Strategy
Mixed strategy has been followed by authors.
Research
Design
Abductive approach is chosen.
Research
Method
Secondary data is the main research method.
Data
Analysis
Secondary data analysis and representative case study are two
analyzing approaches.
Research
Credibility
Ten criterions (mentioned previously) are followed
throughout the research to assure the quality and validity.
Research
Ethics
Copyrights, and data management guidelines are followed.
Figure 5: Summary of Methodology
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Theoretical Framework
In this section, authors define chosen theories and indicate their relationship
with the research. These theories will also help on the interpretation of
analysis, also the creation of conclusion. “Business Model”,” Sport
Entrepreneurship”, “Porter’s Five Forces Framework” and “Human
Capital” are the chosen frameworks for the research.
3.1 Business Model
According to Osterwalder and Pigneur (2010, p.14) “A business model
describes the rationale of how an organization creates, delivers, and captures
value.”. The starting point of a business model is a concept that simplifies
explanation and discussion (Osterwalder and Pigneur, 2010). In addition, the
business model helps to define the organization and to identify other
organizations and competitors (Osterwalder and Pigneur, 2010). In addition,
Osterwalder and Pigneur (2010) describe the business model as a language
that helps create and change strategic alternatives for organizations. This
theory examines the business models that football teams can apply when they
create a new business approach after new regulations and developments in the
football industry.
The sport industry is developing day by day, and clubs need to build new
models in the face of this growth. “European Football has significantly
changed especially over the last 20 years, following an intense process of
trading and marketing, a process that has brought important sums of money”
(Dima, 2015, p.1245). The sport industry has become an important economic
industry, and the commercialization of sports required the professionalization
of football teams (Söderman, 2013). According to Söderman (2013, p.7)
football teams do not only provide a service, but they also provide
interconnected “value capture”. This value capture includes teams, sport
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competitions, players, football services, merchandise, and commercial
activities. New stadiums, broadcasting networks, efficiency of players and
transferring popular players and many factors make football an attractive
industry and a business (Şener and Karapolatgil, 2015, p.15).
Football teams' success makes football teams earn high income. “Logo et al.
(2004) propose a theoretical model of the relationship of the key dimensions
of football clubs’ performance” (Galariotis, Germain and Zopounidis, 2017, p.
591). In addition, revenues generated by sports performance affect the
financial performance and this creates a cycle between each other, as well as
– broadcast revenues, ticket prices and merchandising (Galariotis, Germain
and Zopounidis, 2017).
UEFA approved the ‘Financial Fair Play’ regulation in 2010 and, according to
this regulation, all clubs needed to balance their financial situation (Dima,
2015). After this regulation, all football teams went towards restructuring and
created a new business plan. Football teams had to earn high revenues with
success and create a good squad for this. In addition, football teams aim to
create value by using their assets (youth academy, scouting system, facilities)
efficiently with the business model. Osterwalder and Pigneur (2010, p.15) state
that the business model is like the outline of a strategy to be implemented with
organizational structures, processes, and systems. Today, young academies
have become an important resource for football teams and have become an
important tool to strengthen the economy in the long-term (Söderman, 2013).
Additionally, football teams tend to design such a business model to achieve a
good long-term financial position and not to struggle with financial problems
in the future. Competition in professional sports makes the business model
necessary, and the role of managers increases (Brady, Bolchover and Sturgess,
2008 p.60).
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According to Osterwalder and Pigneur (2010), a business model consists of
nine blocks, which are:
Customer segments:
Customers are the most essential component of a business model that allows a
company to continue its activities by profiting (Osterwalder and Pigneur,
2010). According to Osterwalder and Pigneur, (2010, p.20) organizations must
decide which segments to serve and design a business model to meet the needs
of their customers.
Football players become products for football teams, who also contribute to
revenues of a club. The player market movement of a player with a valid
contract between two sports organizations is called transfer (Andras and
Havran, 2015, p.67). The success and failure of clubs differ according to the
capacity of a club and a strong squad is crucial to be successful (Dolles and
Söderman, 2013). Football teams also create a potential customer within
themselves. According to Dolles and Söderman (2013), each football team is
a potential customer of another as they are interdependent to be able to transfer
the players that they need to improve their quality.
On the other hand, business plan designed for diversified customers serves two
unrelated customer segments with different needs and problems (Osterwalder
and Pigneur, 2010, p.21). In the football industry, supporters are one of the
most important components for clubs. “Football without fans with a shared
emotional investment in their team’s performance, and an emotional
investment in the failure of their competitors, doesn’t work – neither as a
human experience nor as a commercial venture” (Hamil, 1999; Ozawa, Cross
and Henderson, 2004 cited in Dolles and Söderman, 2013, p.18).
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Value propositions:
According to Osterwalder and Pigneur (2010, p.22), value propositions are
about solving a customer problem or satisfying a customer's needs. Value
proposition consists of a product or services to the requirements of specific
customer segments (Osterwalder and Pigneur, 2010, p.22). The value
proposition is the section of what are the benefits presented and answers for
what problems are solved.
In the value proposition offered by football clubs, they should choose potential
value of stakeholders and make suggestions that are considered financially
profitable for the club (Vrontis, Thrassou, Kartakoullis and Kriemadis, 2014
p.358). The efficient use of the football club’s resources increases the
efficiency and effectiveness of the club and ensures that its value is captured
(Dolles and Söderman, 2013). As highlighted by Söderman (2013, p.34),
youth academies allow football clubs to recruit new talents, through which
they benefit. Hence, youth academies are strategic for “product development”
(Söderman, 2013). Using their own resources effectively and generating
income are important elements for football clubs. Besides, it is important for
the success of a team that the club invests in youth academy and improves the
performance of junior players.
The aim of football teams is to present players to the professional football
market and recruit players for international championships.
Professionalization of football academies helps teams to release players who
can play at the top level. By keeping players’ performance high and improving
them, football teams can both invest in their own teams and become a resource
for other clubs.
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Channels:
Osterwalder and Pigneur (2010, p.26) state that channels are one of the most
important parts of the business plan because they provide the connection
between the company and customer. In addition, channels are a tool for
companies to advertise their services and allow customers to evaluate the
company’s value proposition (Osterwalder and Pigneur, 2010, p.26). Football
tournaments, that are followed by millions of people, are the platform that
clubs and players demonstrate themselves.
National leagues, international tournaments such as - UEFA Champions
League, European Cup, and FIFA World Cup, are the major football
organizations that are broadcasted on TV and followed by millions, even
billions, of people. These organizations are great opportunities for the players
to prove themselves and being noticed by other potential buyers.
Customer Relationships:
In customer relations, the company must determine how they will
communicate with their customer (Osterwalder and Pigneur, 2010, p.28). In
addition, according to customer relations options, it can drive to motivations
such as customer acquisition, customer retention and boosting sales.
Companies must be progressive service sellers to compete with other offers
(Bauer, Sauer and Schmitt, 2005). Furthermore, the company needs to
establish good personal management activities with their stakeholders. Social
media has become a platform for consumers to communicate with the
companies (Kuzma, Bell and Logue, 2014).
In today’s football industry, social media is the most important communication
platform for the clubs to interact with supporters, as they are a significant
source of income for the club. (Koenigstorfer, Groeppel-Klein and Schmitt,
2010, p.649). The fan base of football teams has also grown rapidly in the last
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decade with the growth of the football industry (Koenigstorfer, Groeppel-
Klein and Schmitt, 2010). Accordingly, football teams want to communicate
more with their fans and therefore they use various social media platforms. In
addition, social media has provided a two-way relationship with fans for
football clubs and gives an opportunity for teams to publish information and
exclusive offers from their social media accounts (Kuzma, Bell and Logue,
2014).
Revenue Streams
Revenue stream is a section of how much income will be earned from the target
audience and the value proposal presented (Osterwalder and Pigneur, 2010).
It is a determination of the revenues that the service company will receive from
its customer. Today, football clubs generate a large part of their income from
transfer revenue, merchandising, sponsorship, and broadcasting rights (Andras
and Havran, 2015). In the business model, the revenue stream is shaped
determined according to the customer segment and the value proposition.
Football clubs interact with each other as talent demanders and talent providers
(Andreff, 2006). Football clubs invest in their players, and after the player
develops, they sell and earn income. Teams focused especially on raising
players earn substantial income from player sales. For example, French
football became the European supplier for professional football players and
contributed to the financial situation of the teams (Andreff, 2006, p.692).
Another revenue stream for football clubs is merchandising. Merchandising
has been a club practice since the football industry has interacted with the
business (Andreff, 2006). Over the years, merchandising has become an
important source of income for football clubs, and fans' interest in team
products has increased this revenue. For example, Manchester United has
established many selling points to sell its products to their fans in Asia. (Ratten
and Ratten, 2011). The success of a team increases the sales of licensed
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products, the talented players and the trophies are the factors that affect the
fans.
Sponsorship is another important source of income in football. According to
Dolles and Söderman, (2013, p.22) sponsorship can be a strategic tool to shape
and promote the image of the football market for clubs and sponsors.
Sponsorship makes a positive agreement between both parties, football teams
earn an additional income through sponsoring companies and also sponsors
can make their own advertisements in the sport industry through football
teams.
Football clubs have become brands due to the increase in the football industry
and these factors have a positive effect on the income channels (Şener and
Karapolatgil, 2015). The success of football clubs directly affects their
revenues, and this is reflected in broadcast and stadium (ticket prices)
revenues.
Key Resources
According to Osterwalder and Pigneur, (2010, p.34) key resources “allow an
enterprise to create and offer a Value Proposition, reach markets, maintain
relationships with Customer Segments, and earn revenues.” (Osterwalder and
Pigneur, 2010, p.34). Determined by the business model, key resources are
required, which can be physical, financial, or human (Osterwalder and
Pigneur, 2010). There is a resource in the football industry depending on
human capital, the key resources of football teams are football players, coaches
and scouts.
“One can discuss game ideas and styles of play forever, but it’s imperative for
a football team to have good players individually, too.” (Söderman, 2013,
p.74). The first target of football teams is to create a good player and then to
create a good team. The main sources of football teams are their players.
Moreover, discovering players and present them to the football market helps
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teams to be more successful and increase their popularity (Radaelli et al.,
2017).
Coaches are another resource for football teams. They play an important role
in the processing and development of the most important key resource
(players) for a football team. The main source of football teams are football
players, but their coaches develop and professionalize them. Every year,
inexperienced and young players join football teams’ youth academy, and
coaches contribute to the tactical and technical development of these players
(Di Minin et al., 2014).
After FFP rule, many football teams drew two way. Firstly, investing in youth
academies and recruit players, and secondly discovering new talents.
According to Radaelli et al., (2017, p.71) football organizations invest millions
of euros to discover talented football players before their competitors.
Scouting system which also relieves football teams economically.
Key Activities
According to Osterwalder and Pigneur (2010, p.36), key activities “...are the
most important actions a company must take to operate successfully.”. In
addition, key activities are important to generate and present a value
proposition, to bring revenue to the market and to maintain customer
relationships (Osterwalder and Pigneur, 2010). Key activities have also an
important place for football clubs because they are the activities required for
football clubs to create value. Investing in the young academy and improving
the players is one of the main key activities of the clubs.
After the UEFA FFP regulation, the introduction of financial constraints on
football clubs and the increase in the debt level of the clubs led European
football clubs to the scouting model (Di Minin, 2014, p.333). Many football
clubs returned to their own resources and attach importance to invest in their
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own facilities to recruit players. Youth academies are very important for the
future of football teams and their financial situation. Dolles and Schweizer
(2010, cited in Dolles and Söderman, 2013, p.12) summarized the benefits of
youth academies as follows “ (1) To identify and develop players for the first
team squad and to train them to make professional football their first career;
(2) to develop players in order to save the club expenditure otherwise spent on
transfer fees; (3) to develop players who can earn the club revenue through
transfer fees; (4) to prepare players also to make a career outside football; (5)
to offer all players of all youth ages and nationalities an opportunity to
experience the best development programme possible.”
Key Partnerships
Companies get into a partnership with other companies to create
resources and reduce risk with the agreement (Osterwalder and Pigneur, 2010,
p.38). In addition, companies are looking for a partner who can reach the same
target group as the institutions and provide financial resources. Football clubs
need partners to be more successful. Financial support and investment make
football clubs economically stronger.
Shareholders are the one that gives the most economic support to football.
Football clubs should ensure financial sustainability and success. Teams need
investments for squad building, transferring, and attracting players, and
keeping good players by high salary wages (Michie and Oughton, 2005).
Except for the income of football teams, it can be provided to invest in the club
with additional revenues and to provide economic comfort for the club.
Cost Structure
According to Osterwalder and Pigneur (2010, p.40) cost structure is “Creating
and delivering value, maintaining Customer Relationship and generating
revenue all incur costs.”. These are the costs that occur when creating a value
proposition in a business model.
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In the football industry, football teams train junior players, and their high-level
coaches constitute an important cost for the teams to create opportunities for
players' recruitment (pool, gym, physiotherapy, sports psychology). Club
opportunities should be very good for a football player to recruit in the best
way. Many clubs are investing heavily in youth academy facilities; such as
football fields for players, whose maintenance create an expense for clubs.
3.2 Sport Entrepreneurship
According to Shane and Venkataraman (2000), entrepreneurship is the process
of recognition with opportunities and different perspectives. Opportunities are
created by people; opportunities and markets are invented, produced and built
accordingly by entrepreneurs (Sarasvathy, 2008). In addition, Løwe Nielsen,
Klyver, Evald and Bager (2017, p.3) state that “Entrepreneurship is a complex
phenomenon that occurs in many different contexts, and varies in terms of its
scope, process and output.”. Entrepreneurship can be analyzed in many ways
because entrepreneurship exists in many different disciplines and the effects
are different (Løwe Nielsen, Klyver, Evald and Bager, 2017).
One of the business areas that entrepreneurship exists is the sport industry.
Ciletti and Chadwick (2012) state that sport is a dynamic and unique industry
that is entrepreneurial by nature. Accordingly, sport entrepreneurship includes
a wide variety of categories of entrepreneurship such as community-based and
corporate entrepreneurship (Ciletti and Chadwick, 2012). Sport
entrepreneurship involves all kinds of innovative, opportunity-driven and
vision-oriented sports activities, and sports entrepreneurship can exist in
different contexts, including the individual, organization and team (Ratten and
Ratten, 2011, p.616).
According to Ratten and Ratten (2011, p.616), “Sports players, agents and
team owners can be entrepreneurial when they are involved in a novel risk
taking activity that is different to what has been done before.”. All
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stakeholders in the sports industry (organizations, employees who contribute
to the economy, consumers, competitors, etc.) contribute to this
entrepreneurship. For example, big football clubs like Manchester United
allocate more budget to spend on research and development, which this affects
their ability to spend more money on risk-taking and innovation (Ratten,
2019).
3.3 Porter’s Five Forces Framework
Porter’s five forces framework help determine the attractiveness of the
industry's competitiveness; these are the threat of entry, the threat of
substitutes, the power of buyers, the power of suppliers and the extent of
rivalry between competitors (Johnson, Scholes and Whittington, 2011, p.54).
In addition, according to Porter's framework, it is not suitable to compete in
the industries where these five powers are high, because there will be a lot of
competition and pressure to make profit (Johnson, Scholes and Whittington,
2011). Also, five forces framework are related to organizations, a useful
starting point for making a strategic analysis for the market. This theory
examines how a football team analyzes potential competitor teams while
creating a business model and how they should plan according to these
analyses.
Strategic analysis is also required in the sports industry where large
organizations take place. “Sport managers need to be strategic thinkers
because these factors are constantly interacting and changing.” (Beech and
Chadwick, 2004, p.222). Organizations, teams, and managers in the sport
industry can develop their own models by strategic analysis or anticipate
threats in advance and act accordingly. The predictability of teams' plans is
crucial for their sportively and economic success. Considering external
factors, taking precautions and creating a model in the football industry may
be in the teams' benefit. “To analyse sector competitiveness, Porter’s five
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forces model was used, comprising the five forces that determine the
attractiveness of the sector. A notable eccentricity of the football sector in this
context though, is the fact that “success” is determined by factors beyond
business parameters, and primarily athletic achievement ones.” (Rossi,
Thrassou and Vrontis, 2013, p.550).
The threat of new entrants
The fact that it is easy to enter the sector affects the degree of competition: if
the entry threat is high, it creates difficulties for those in the industry (Johson,
Scholes and Whittington, 2011, p.55). In order to reduce the threat of new
competitors in an industry, entry barriers should be high because if it is easy
for competitors to enter the market, it may pose a threat in the future and
weaken the position of existing ones (Johnson, Scholes and Whittington,
2013). According to Beech and Chadwick (2004, p.223), new participants are
inevitable and potentially dangerous in a rapidly growing and dynamic
industry.
New entrants in the football industry can pose a great threat to other teams.
The new owners of the teams enter the market with a large budget and ensure
that these teams pose a threat to other teams. For example, increasing market
revenues in European football became the target of foreign investors, and one
of them, Roman Abramovich, became the owner of Chelsea F.C. in 2003
(Birkhäuser, Kaserer and Urban, 2017). In addition, in the same period, the
financial conditions of the European professional club deteriorated, and there
was a high increase in player salaries.
Buyer power
“Buyers are the organisation’s immediate customers, not necessarily the
ultimate consumers. If buyers are powerful, then they can demand cheap
prices or product or service improvements liable to reduce profits.” (Johnson,
Scholes and Whittington, 2011, p.58). Buyers power reduces or increases the
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profit of suppliers. If the power of the buyer is low, the customers have the
minimum option and service, and purchasing can meet certain needs, while if
the buyer’s power is high, customers have a wide choice and they have the
right to choose from services that will meet their needs (Beech and Chadwick,
2004).
The most productive teams in the football industry are profitable. There are
low number of teams in Europe with the ability of developing football players;
thus, this ability can help these teams to gain an advantage, when selling their
players.
Supplier power
“Suppliers are those who supply the organisation with what it needs to
produce the product or service. As well as fuel, raw materials and equipment,
this can include labour and sources of finance.” (Johnson, Scholes and
Whittington, 2011, p.58). The strength of suppliers is determined by how
easily suppliers can change prices. According to unique products and services
they provide, it affects the power of suppliers positively.
According to Beech and Chadwick (2004, p.224), “Suppliers are those
businesses that supply the sport organisation with the resources it needs to
operate.”. Football teams with quality youth academies play a role of suppliers
in the football market. By using the main resources of football teams to be
determining and developing potential players, they get an edge over the teams.
For example, the Italian football team Udinese Calcio is one of the best in
raising and finding players and it provides players to other football clubs and
this club is defined as “Europe’s biggest talent factory” (Di Minin et al., 2014,
p.331).
The threat of substitution
“Substitutes are products or services that offer a similar benefit to an
industry’s products or services, but by a different process.” (Johnson, Scholes
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and Whittington, 2011, p.57). A cheap and easy service can create a supplier
change, which can undermine companies’ position and decrease their profits.
Customers can switch to alternative products and it can also set a limit on
prices that can be acquired in an industry (Johnson, Scholes and Whittington,
2013).
“If customers can switch easily from one organisation to another to gain
benefit, the threat of substitution (and, therefore, buyer power) can be said to
be high.” (Beech and Chadwick, 2004, p.224). Transfer is very common in the
football industry; many teams satisfy a need from other teams. On the other
hand, many teams fulfil the need of a new player with their own players by
investing in youth academies and scouting.
The level of competitive rivalry
“These wider competitive forces all impinge on the direct competitive rivalry
between an organisation and its most immediate rivals.” (Johnson, Scholes
and Whittington, 2011, p.59). In this category, the number and strength of
competitors is important. Factors such as the size and growth of the market,
the number of competitors and their perspective market share, levels of fixed
costs and barriers to exit affect competition (Beech and Chadwick, 2004,
p.225).
All football teams become a threat to each other. The football industry is
growing more and more, so teams are competing hard to become champions
and contribute to their income. Football teams invest in being the best in the
season and to overtake their rivals and develop strategies accordingly.
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3.4 Human Capital
“Human capital theory posits that individuals with more or higher quality
human capital achieve higher performance in executing relevant tasks such as
the pre- and post-investment activities of the venture capital process.” (Dimov
and Shepherd, 2005, p.2). Human capital represents individuals’ contribution
to organizations, they contribute to companies through knowledge, skills,
education, and personal experience (Dimov and Shepherd, 2005). Moreover,
human capital can increase productivity through investment in human
resources, and the costs of this investment are provided for future use (Pasban
and Nojedeh, 2016). Human resources can create strategic plans and define
goals to motivate and train their employees according to these plans
(Armstrong, 2008 cited in Pasban and Nojedeh, 2016, p.251).
The entrepreneurial vision for football organizations is the discovering and
deployment of new players (Radaelli et al., 2017). Human capital for football
organizations includes the discovery and deployment of new players (Radaelli
et al., 2017, p.72). Furthermore, the discovery and recruitment of talent players
represent teams getting a sporty and better market niche (Radaelli et al., 2017).
Organizations can employ more qualified staff to gain competitive advantage
and outpoint their competition. The skills of employees such as good
performance and creativity provide a competitive advantage in the
organization (Armstrong, 2008, cited in Pasban and Nojedeh, 2016, p.252).
Players, which are an important human capital for their teams, have a strategic
value for teams and design teams with the “best” players in sport organizations
(Radaelli et al., 2017). Therefore, teams that invest in football players take
risks and wait for the recruitment of the players and their contribution to the
team.
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3.5 Summary
Business Model After the FFP regulations, the
initiatives that football teams will
make with the business model ensure
their sportive and financial success.
The business model that football
teams can apply for new
entrepreneurial ventures is
examined.
Sport Entrepreneurship The relationship between football
industry and sports entrepreneurship
is examined.
Porter’s Five Forces Framework The effects and analyses of potential
competitors of football teams on
each other and the kind of
framework that should be used while
creating a business model are
examined.
Human Capital The values and effects created by the
players, who are the equity of teams,
for football teams are examined.
Figure 6: Summary of Theoretical Framework
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Results
The chapter defines the collected secondary data under three headlines.
Headlines are created depending on what secondary data represents. In the
“Borussia Dortmund” and “AFC Ajax” sections, there is a subheading called
“Secondary Interviews”; which represents the secondary qualitative data.
Hence, rest of data represent secondary quantitative data.
4.1 Borussia Dortmund
Borussia Dortmund is a German professional football club founded in 1909,
located in Dortmund, with adopting black and yellow colors. Nowadays, the
team is 110 years old, and currently competes in the German top football
division, Bundesliga. (KGaA, B., 2020) In its 110 years of history, the club
has won various trophies. These trophies are (Statista, 2019):
8x Bundesliga Champion
5x German Super Cup
4x German Cup
1x UEFA Champions League
1x UEFA Cup Winner’s Cup
4.1.1 Shareholder Structure
Since Borussia Dortmund went public, the club has shareholders and free float
shares, like any other open joint stock company. The number of shares owned
by each shareholder constitutes the shareholder structure. (Figure 7) Each
shareholder has a voice on this club’s (or company’s) management. For this
reason, these shareholders take managerial decisions by informing one
another.
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Figure 7: Shareholder Structure (Knipping M. and Stahlschmidt M., 2019)
In the ‘Shareholder structure’ pie chart (Figure 7), there is a heterogeneous
structure that consists of six shareholders with a close number of shares to each
other. “Evonik Industries” and “Bernd Geske” spark out with 9.83% and
9.35%. On the other hand, “Ballspieleverein Borussia 09 e.V. Dortmund”
holds only 5.53% of shares, which represents the club itself. According to the
“Figure 7”, the club has an equal voice on the club’s management with other
stakeholders, as their share are close to each other.
However, free float shares are remarkably the most of all by 59.86% and
exceeds sum of all shareholder’s percentage. These shares are not owned by
anyone and open to public, so everyone (or any corporate) can buy and become
one of the shareholders of Borussia Dortmund.
4.1.2 Revenue Structure
Borussia Dortmund has six revenue streams: transfer deals, miscellaneous,
merchandising, TV marketing, advertising, match operations. (Figure 8)
Income from these channels can contribute to strengthen the scout system.
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Hence, Borussia Dortmund can fund itself to discover hidden talents in
worldwide.
There are three major channels occupying most revenues: TV Marketing,
transfer deals, and advertising. TV marketing has the biggest portion by
34.19%, which is followed by transfer deals with 24.55%; and advertising
takes the third place with 19.78%.
Figure 8: Revenue percentage for 2018-19 (Knipping M. and Stahlschmidt M.,
2019)
Transfer deals form most of the revenue in both seasons (2018/2019 and
2017/18). In the Figure 9, revenues are given with their numbers and there is
a comparison between two seasons. In the 2017/2018 season, transfer deals
were the most among all by 222,733 million € and TV marketing followed it
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by 122,293 million €. However, in the next season, TV marketing jumped to
the first place by 167,349 million €; so, transfer deals were second by 120,204
million €.
Figure 9: Revenue in Euro (x1000) (Knipping M. and Stahlschmidt M., 2019)
4.1.3 Transfer Data
Borussia Dortmund achieved its highest transfer revenues on 2017/18 season
by exceeding 200 million €. (Figure 10) Besides, the biggest gap between
transfer revenues and expenses also occurred in 2017/18 season. The gap
stands for the profit when expenses are subtracted from revenues, so the
biggest profit has been made at the same season.
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Correspondingly, 2014/15 season is the calmest transfer season among five
seasons. In other words, transfer revenues and expenses are the lowest of five
seasons; so, the profit was the lowest as well.
Figure 10: Last 5-year Transfer Report (Knipping M. and Stahlschmidt M.,
2019)
In the “Figure 11”, eleven most profitable transfers of the Borussia Dortmund
are given. Ousmane Dembele holds the record on departure by 125 million €
to FC Barcelona. From Dembele’s transfer deal, Borussia Dortmund’s net
margin is 110 million €, which is estimated by extracting the arrival fee from
the departure. In other words, sealing the transfer of Ousmane Dembele cost
15 million €.
Figure 11: Eleven most profitable transfers (Transfermarkt.com, 2020)
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Christian Pulisic takes the second place after Dembele, as he has the second
highest profit margin by 64 million €. The player has joined from the U19
(Under-19) team of Borussia Dortmund, so there are no expenses on this
transfer case. Chelsea paid 64 million € for Pulisic in 2018/19 season, so the
player made his way to the EPL.
On the other hand, every player in the “Figure 11” have transferred to the top
tier leagues of Europe. For instance, Pierre-Emerick Aubameyang, Henrikh
Mkhitaryan and Ilkay Gundogan’s next destination the Premier League like
Christian Pulisic. These deals have contributed to the club’s profit; therefore,
the total net margin from the transfer campaign to the top tier English clubs
was 150.75 million €.
4.1.4 Social Media
Figure 12: Social media (own implications from club’s social media pages)
Borussia Dortmund is presented on four major social media channels of
Instagram, Twitter, Facebook, and YouTube. There are two Instagram pages
of Borussia Dortmund called “@bvb09” and “@blackyellow”; they are
followed by 10,400,000 and 374,000 people. The club is represented with two
accounts on Twitter as well, which are displayed as “@BVB” and
“@BlackYellow”. On Twitter, Borussia Dortmund has 3,897,000 followers in
total: 3,500,000 followers for “@BVB” and 397,000 for “@BlackYellow”.
The club’s Facebook page can be found as “@BVB” by typing into the search
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box and has 15,000,000 likes. On the other hand, there are 601,000 subscribers
on Youtube.
The result after interpreting the social media followers of each channel,
Facebook is the strongest social media channel of the club. This means the
club can access 15,000,000 people at the same time when they post content to
their page. Instagram is the runner up by 10,774,000 followers in total of its
two Instagram pages.
4.1.5 Secondary Interviews
"Our ambition is to compete for the Bundesliga and regularly
make the latter stages of the Champions League. If you look at
the big boys we're up against -- Bayern, the top teams in England
and Spain, Paris Saint-Germain -- they each start the season
roughly a quarter of a billion Euros ahead of us"
-Michael Zorc, sports director of Borussia Dortmund (Honigstein, 2019)
Borussia Dortmund does not give up on their goals for Bundesliga title and the
Champions League qualification, as Michael Zorc says above. In fact, there
are “big boys”, who begin every season with approximately 250 million €
ahead of Borussia Dortmund. “Big boys” stand for the clubs wallowing in
wealth. As it is referred above, Borussia Dortmund remains ambitious for its
goals, and takes necessary actions, despite of the “big boys”.
“I think they saw a lot of what I do now, my attacking mode, or
just being a creative player and making a difference in the game”
-Christian Pulisic, former Borussia Dortmund player (Ahmed 2018)
Christian Pulisic defines on how he is discovered, and what sparked on him.
In other words, as it is referred, he is discovered because they (Borsussia
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Dortmund) saw what he can do as an attacker. The club saw his abilities on his
attacking side, as a creative player and a game-changer.
“We try to find these extraordinary players when they are not at
their peak. We develop them and then, at some time, we know
that they will go.”
-Michael Zorc, sports director of Borussia Dortmund (Ahmed, 2018)
Michael Zorc summarizes the club’s transfer principle. He states that the club
is already aware of scouted player’s possible departure at any time. For this
reason, the club discovers them when they are not at their peak potential. Then,
their hidden potential arise during their Borussia Dortmund spell, and they are
presented to the world football stage.
"It would be naive to think that finances don't have any influence
on what happens on the pitch. That's why we like working with
young players who are at a level we can afford and generate
money that we can use to close the gap somehow."
-Michael Zorc, sports director of Borussia Dortmund (Honigstein, 2019)
Michael Zorc honestly states that their transfer policy is influenced by
finances. The club prefers younger players due to this reason; thus, they work
with affordable young players and generate money from them. In this way,
Borussia Dortmund tries to close the financial gap with richer clubs.
"I know the club and they achieved a lot with young talent and
that makes people think that it is a good place. Real Madrid is
probably also a great place for a challenge but Dortmund just
felt right for me."
-Alexander Isak, former Borussia Dortmund player (Ahmed, 2018)
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The club’s achievements with young players in the past is a good source of
reference for newcomer young players, as Alexander Isak states above. Young
players rely on these references when they make their decision on moving to
Borussia Dortmund. Alexander Isak says that Borussia Dortmund felt right for
him, as they achieved a lot with young talents.
“We also explain to the boys who join us -- to Dan-Axel Zagadou
from PSG or Jadon Sancho from Manchester City -- the special
feeling of the Ruhr area. They understand and there are rarely
problems because they're very professional and have a clear
vision of their career trajectory. They want to succeed and so do
we. Our targets align.”
-Michael Zorc, sports director of Borussia Dortmund (Honigstein, 2019)
Michael Zorc states that Borussia Dortmund and young players -such as
Zagadou and Sancho- can understand each other. These two sides can
understand each other’s vision and problems in most cases. Players have a
vision of career trajectory and they are professionals. Both the club and players
want to succeed, hence there is a win-win situation.
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4.2 AFC Ajax
AFC Ajax is a Dutch professional football club founded in 1900, based in
Amsterdam, and embraces white-red colors and competes in the highest Dutch
football division (aka. Eredivisie). Ajax has fit numerous trophies/titles in its
120 years old history, so their museum is filled out with them. Here are titles
won by AFC Ajax:
● 34x Eredivisie Champion
● 19x Dutch Cup
● 9x Dutch Super Cup
● 1x UEFA Cup
● 4x UEFA Champions League
● 1x UEFA Cup Winners Cup
● 2x Intercontinental Cup
● 3x UEFA Supercup
4.2.1 Shareholder Structure
AFC Ajax has various shareholders, as a publicly held company. The various
shareholders of the club form the shareholder structure with their portion of
shares. (Appendix 8) Unlike Borussia Dortmund, there are no free floats, so
the club is the biggest stakeholder itself. Accordingly, the club association
(aka. “Vereniging AFC Ajax”) is the major decision maker on the club’s
management.
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Figure 13: Shareholder structure (Marketscreener.com. 2020)
As previously mentioned, AFC Ajax’s shareholder structure is adversely
different from Borussia Dortmund. Additionally, shareholders’ entities are not
equal, as well as their impact on the club’s fate. This shareholder structure
(Figure 13) visualizes the dominance of “Vereniging AFC Ajax” by 73%. The
nine other stakeholders share the 27% of portion among each other.
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4.2.2 Revenue Structure
Figure 14: Sales per Businesses (*=represents values for 2018) (Statista, 2019)
There are five revenue streams of AFC Ajax: Football, Partnerships,
Merchandising, Television, Other. (Figure 14) Profit from these revenue
streams can contribute to the improvement of youth academy and keep running
of club’s system.
“Football” provides the most revenue in both seasons for AFC Ajax. Income
generated from football in 2017/18 season is 34.44 million € by constituting
37.5% of all revenue in that season. In the 2018/19 season, the profit made
from “Football” is 133.06 million € and 65.7% of revenue is constituted. Other
revenues have been close to their previous season amount. Football revenues
made a huge increase in one season comparing to other revenue streams.
“Partnerships” is the second major revenue stream after “Football”, then
“Merchandising” takes the third place. Unlike “Football”, second and third
biggest revenue streams are increased in smaller portions. Therefore,
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“Partnerships” increased from 28.93 million € to 34.35 million €, and
“Merchandising” increased from 14.06 million € to 21.22 million €.
4.2.3 Transfer Data
Figure 15: Revenue from departed transfers (Statista, 2019)
AFC Ajax has made revenues from departed transfers above 30 million euro
in last three seasons. (Figure 15) Transfer revenue graph illustrated fluctuantly
as 2016/17 season’s revenue is around 80 million €, then drops to 40 million
€ on the next season, and ended up at around 70 million € on 2018/19 season.
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Figure 16: Eleven most profitable transfers (Transfermarkt.com, 2020)
“Figure 16” illustrates AFC Ajax’s eleven most profitable transfers. Matthijs
de Ligt takes the first place by 85.50 million € net margin. Frenkie de Jong has
the second place by 75 million €. These first two most profitable players are
raised from the youth academy.
Six out of eleven players are raised from the club’s youth academy, so there is
no fee on their arrival (except for Kasper Dolberg). Besides, AFC Ajax has
earned 243 million in total. The most spent amount on a player is only 11
million € for Hakim Ziyech, who is on his way to Chelsea for 40 million €
with 29 million € of net margin.
4.2.4 Social Media
Figure 17: Social media (own implications from club’s social media pages)
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The Instagram page of Ajax is called “@afcajax” for its both Dutch and
English pages; it has a total of 10,774,000 followers. Then it is followed by
the Facebook page, with the same name, by 3,200,000. There are 1,374,800
followers on Twitter and 656,000 subscribers on YouTube.
The numbers given in “Figure 17” represents how many people can the club
reach at the same time, when they post a content on social media. For example,
approximately 11 million people can interact with a post from the club on
Instagram. Another instance, a video can drop on 656,000 people’s timeline
on YouTube.
4.2.5 Secondary Interviews
“… Ajax’s youth academy is world famous. The goal of Ajax is
to form talented youngsters into top football players. Only the
very best will reach the first team after a difficult and often long
and tiring road. Ajax has attached great importance to its own
world renowned youth development program. In the season
2010/11, the Ajax selection largely consists of home grown
players.”
-Edmond Claus, former Ajax Academy Youth Coach, (Graham, 2011)
Edmond Claus states the fame of AFC Ajax’s youth academy, which is
worldwide. It is stated that, the club’s goal is centered around the development
of youth players. Although, Claus also indicates the difficulty of youth player
development; so only exclusively best ones make their way to the first team.
Besides, in 2010/11, AFC Ajax’s first team squad was mainly consisted of
players from youth academy.
“Marc and I have been players. We have flown the nest at a
certain point to find another challenge and we know that is going
to happen. That is not a problem as long as they give two, three,
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four good years of service to the club, win the league, play
amazing football. Then you can go. Also, for the young players
from the academy to have a path to the first team we need to open
up spaces. If you have no spaces, then talent underneath is
suffocated.”
-Edwin van der Sar, CEO of AFC Ajax (Lawrence, 2019)
Players are aware of a possible departure in the future, as van der Sar stated.
Accordingly, players must serve to their home club for 2, 3, or 4 years before
they leave. Departing players open new spots in the first team for players from
youth academy. As it is underlined, talents may become dulled if they did not
get the spot needed.
“Before players are admitted into the youth development
program, they must go through a stringent selection process.
Ajax coaches and scouts use the ‘TIPS’ system for selection.
Technique, Insight, Personality and Speed are the essential
qualities that an Ajax (youth) player needs to possess. With the
TIPS system, the most talented players become familiar early on
with Ajax’s unique football style.”
-Edmond Claus, former Ajax Academy Youth Coach, (Graham, 2011)
Difficulty of selection process to the youth academy has been mentioned by
Edmond Claus on above. This selection is so strict for candidate players, so
coaches and scouts are looking for four main qualities: Technique, Insight,
Personality, Speed. The talented players, who possess these qualities, can
become familiar with the club’s particular football style from very beginning.
“At our youth development complex called ‘De Toekomst’ (The
Future), we have all facilities available for players to get to the
top. Everything, both on and off the field, must be perfectly
organised. Not only for Ajax 1, but also for the youth academy
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at ‘De Toekomst’. Only then, top performances can be
delivered.”
-Edmond Claus, former Ajax Academy Youth Coach, (Graham, 2011)
AFC Ajax’s youth academy called ‘De Toekomst’ (The Future) has every
facility for player’s improvement to the top level. As it is stated by Edmond
Claus, everything is organized properly both inside and outside the field. By
doing so, top performances can be delivered from the youth academy to the
first team.
“We were maybe a bit reluctant to put money into older players
and we thought we could solve things with our academy. But
going back to our experience, in ’95 we had a very young and
talented team with Edgar Davids, Clarence Seedorf, Overmars,
Frank and Ronald de Boer, Patrick Kluivert – but we also had
Frank Rijkaard and Danny Blind. They had played in World
Cups and won Champions Leagues. We reflected a bit on the old
success from ’95. We wanted to combine the abundance of young
talent with experience.”
-Edwin van der Sar, CEO of AFC Ajax (Lawrence, 2019)
Edwin van der Sar indicates that AFC Ajax was unwilling on spending money
on older players, so the club believed that the academy is the sole solution. In
the club history, there are many talented well-known players achieved
successes in World Cups, as well as Champions League. Hence, the club wants
to harmonize young talent with experience.
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4.1 Brand Value of the European Leagues
Figure 18: Brand value of top tier European football leagues in 2019 (Statista,
2019)
English football league has the highest value, among nine other leagues, by
8,684 million €. (Figure 18) The gap between the English league and the rest
is so high, even the second and third most valued leagues’ total value can’t
exceed it. Second most valued football league belongs to Spain by 3,998
million €, whilst German league is third by 3,815 million €.
In the case of AFC Ajax and Borussia Dortmund, the German league is valued
more than ten times of the Dutch league’s value. As it is illustrated, the Dutch
league is valued only 169 million €, so AFC Ajax is competing in a less valued
league than the German league of Borussia Dortmund.
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Analysis
This chapter analyses two case studies as they are representatives of two
different approaches. Borussia Dortmund represents clubs that are
specialized at scouting, while AFC Ajax represents clubs that are famed with
their youth academy. The chapter has separated into two parts by the name of
two clubs. Two cases will be analyzed according to four theories; thus, four
subheadings under two clubs are named four theories.
5.1 Borussia Dortmund
5.1.1 Business Model
5.1.1.1 Key Partners
Having a rich history of 110 years and fit various sportive successes in this
history, it attracts to gather key partners for Borussia Dortmund. On the other
hand, the club directory was aware of the necessity of key partners; thus, most
of the shares were opened to the public. (Figure 7) As previously mentioned
within the “Theoretical Framework”, shareholders are the biggest economic
supporter of football. For this reason, shareholders’ contribution as key
partners is essential to provide an economic comfort, and to develop a
sustainable growth by investing on scouting.
5.1.1.2 Revenue Stream
As illustrated in Figure 8 and 9, Borussia Dortmund’s transfer revenue
constitutes a notable portion of the revenue stream. The portion of transfer
revenue among other revenues shows that Borussia Dortmund is an active
team on transfer. Furthermore, the club is concentrated on player development
to make a sale at the right time, which is defined by the huge gaps between
transfer revenues and sales on “Figure 9”. Other revenue streams, such as “TV
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marketing”, also contribute to Borussia Dortmund’s finance and to keep its
scouting system alive.
5.1.1.3 Key Activities
The club invests in the scouting system to discover the undiscovered talented
players. For this reason, the club sends scout around the world, which is
considered as the major key activity under the business model framework. For
this reason, high incomes obtained from transfers made by scouting. For
example, Ousmane Dembele (a French professional footballer) purchased
from Stade Rennais F.C. (a French professional football club) for 15M Euros
in the 2016/2017 season, was sold to FC Barcelona (a Spanish professional
football club) for 125M Euros in the 2017/2018 season. (Figure 11)
5.1.1.4 Key Resources
There are three key resources defined in the “Theoretical Framework”:
Players, coaches, and scouts. Players get to the pitch and play their football.
Their good run of form, or revealed potential, can make them to move to a
bigger club. Coaches are responsible on player development and help them to
reach their potential. Scouts are officials who discover undercover talents, or
promising players, and incorporates to the Borussia Dortmund.
5.1.1.5 Value proposition
There is a double-sided value proposition. First, a value proposed for the newly
arrived players. Borussia Dortmund offers a complete facilitation for newly
arrived players, where every need for player development has met. Likewise,
Bundesliga -where Borussia Dortmund competes- is the third most popular
league of Europe. (Figure 18) Accordingly, the club gives an opportunity to
its players to prove themselves in a league, which has many followers
(including the scouts of financially rich clubs). Second, a value proposed for
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the financially rich clubs. Borussia Dortmund offers players for these clubs,
who reached to his full potential and proved himself in his team appearances
on Bundesliga, and/or UEFA Champions League.
5.1.1.6 Customer Relationship
In accordance with the “Theoretical Framework”, social media is the most
important platform for clubs to communicate with fans and inform them about
promotions (or offers). In the case of Borussia Dortmund, the biggest platform
communication with fans is Facebook. (Figure 12) Accordingly, Facebook
pledges a huge interaction with most people of all four channels, so the club
has an opportunity to build relations and promotions for 15,000,000
subscribers at the same time. (Figure 12)
5.1.1.7 Channels
Borussia Dortmund competes in a 3,815 million € worth league of Bundesliga
(Figure 18) and competes in the UEFA Champions League. Additionally,
34.19% of club revenue comes from TV Marketing in 2018-19 season, which
proves the strength of the channel between fans and the club. (Figure 8)
Secondly, other clubs’ officials (or scouts) are also followers of Borussia
Dortmund’s matches to watch certain players. The tournament and the league
of Borussia Dortmund offers a popular channel to advertise itself. Therefore,
the club offers a great opportunity for its players to prove themselves; thus,
these players get the attention of potential buyers.
5.1.1.8 Cost Structure
Club facilities and transfer expenses constitute the cost structure of Borussia
Dortmund. Borussia Dortmund’s club facilities are a major part of their player
development system. Thence, any necessary element for players’ development
(training grounds, gym, coaches, scouts etc.) form a significant cost as “club
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facilities”. Transfer expenses represent the amount of money spent for buying
players. As illustrated in the “Figures 10 and 11”, transfer revenue (or profit
margin) significantly exceeds transfer expenses (also “fee per player”); hence,
it defines how the club works on player improvement and sells at the right
time.
5.1.1.9 Customer Segment
Customer segment for Borussia Dortmund are in two groups as “clubs” and
“fans”. Clubs are addressed to ones, which never have any monetary problems.
Borussia Dortmund considers them as potential buyers of their players and
attracts them if players are well-formed. The club attracts fans as well,
relatively to its well-form. In other words, fans keep follow the team on/off the
field and buy merchandises (jersey, hat, scarf etc.) as it is given in “Figures 8
and 9”.
5.1.2 Sport Entrepreneurship
Transfer policy of Borussia Dortmund is based on scouting, so they seal deals
in a very low amount of money. After playing for the club for 1-2 years at
least, the club sells these players with profit. However, it is very unclear to
estimate the revenue amount from a player. This does not mean that 100
million € profit will be provided from every departure, only because Ousmane
Dembele’s departure provided 110 million €. (Figure 11) In other words, there
is a risk taken by Borussia Dortmund in terms of the ‘Sport Entrepreneurship’.
The profit from each player is varied upon player’s performance on matches
and competitions; so, it may me whether in a record or very low amount. The
match performance is relevant with player development through training.
Therefore, Borussia Dortmund scouting system is considered as an
entrepreneurship within football, along with its risks included.
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5.1.3 Porter’s Five Forces Framework
According to the ‘Porter’s Five Forces of Framework’, as it is described in the
“Theoretical Framework” chapter, the supplier power is indicated by the
change made. Borussia Dortmund’s notable revenue from TV Marketing
(Figure 9) is the return of suppliers’ contribution on improving the players.
The quality of players is directly proportional with the club’s football, which
attracts more people to watch the team from TV and contributes to the TV
Marketing revenue.
Threat of entry in Borussia Dortmund’s case can be interpreted from multiple
aspects within the ‘Five Forces Framework’ context. First, the competition on
scouting a player; secondly, competition in tournaments and the league. These
different competitive rivalries are both against other clubs. For this reason,
there are other clubs with scouts among Europe to snipe underrated talents.
Borussia Dortmund is challenging to eliminate (or minimize) threats of entry
and substitution in two fronts: Inside and outside the pitch.
5.1.4 Human Capital
Borussia Dortmund aims the top of Bundesliga and the Champions League by
investment and improvement of its own human capital. ‘Human Capital’
theory can be interpreted in two aspects: Player, and the club. Players are
considered as the main human capital themselves, and the club is the one
enhances the human capital.
From the player’s (or ‘human capital’) perspective, it is attractive to wear the
black-yellow jersey by knowing to have a bright future in the aftermath of
Borussia Dortmund, as many players make their way to bigger leagues and
clubs. After each move to bigger clubs, ensuing players are influenced from
these cases; hence, they feel motivated to give their best for Borussia
Dortmund.
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In the case of Borussia Dortmund, the club snipes high-potential players with
a reasonable price and sells them after they created value on them. It is the
club’s responsibility to provide necessities for player development, and to
follow players’ progress. In other words, the club must meet demands of value
creation of its human capital and make the sale decision once a human capital
reached its maximum value.
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5.2 AFC Ajax
5.2.1 Business Model
5.2.1.1 Key Partners
Despite Ajax’s winning four continental and one intercontinental cup within a
120-years-old history, the club is not popular enough due to Eredivisie’s brand
value. (Figure 18) In fact, this makes harder for AFC Ajax to find new key
partners, such as shareholders, and sponsorships. (Figure 13) Additionally, the
club does not have free float shares, and 73% of shares are owned by the club.
For this reason, according to the “Figure 13”, other nine shareholders’
economic impact as a key partner is low.
5.2.1.2 Revenue Stream
“Figure 14” illustrates that “Football” constitutes the majority in the revenue,
which represents transfer revenues and match operations. On the other hand,
transfer revenues are above 40 million € in last three seasons. (Figure 15) The
illustration of transfer revenues for last three seasons shows AFC Ajax is an
active club on transfer. Besides, the club relies on its players raised from the
youth academy. In other words, the club has shaped a new revenue stream
from selling of players raised from the youth academy. Accordingly, six out
of eleven most profitable players originally came from the youth academy.
(Figure 16)
5.2.1.3 Key Activities
The club invests on its academy to raise players for the first team and sell them
at the right time. From the first moment to last, a player’s progress has been
followed. Selection process goes on from the beginning until the end, so not
every player can show a promising improvement and make their way to the
first team. The club earns revenue from the ones that make their way to the
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first team and prove themselves. For example, Mathijs de Ligt (Dutch
professional player) made his debut at the first team on 2016/17 season, was
sold to Juventus (Italian professional football club) for 85 million € in the
2019/20 season. (Figure 16)
5.2.1.4 Key Resources
Players, coaches, and scouts are three key resources for football clubs, as its
defined in the “Theoretical Framework”. In the case of AFC Ajax, scouts
discover players when they are very young for the youth academy. These
young scouted players go through a selection process by coaches in the
beginning. Then, selected ones are tracked and trained by coaches throughout
the first team. Players must make a notable progress before joining AFC
Ajax’s first team. Therefore, these three key resources complete one another.
Scouts discover players in the very beginning. Coaches do whatever its
necessary for players’ improvement. Lastly, players prove themselves on the
pitch whether they are worth to move to a bigger club or not.
5.2.1.5 Value proposition
The double-sided value proposition also applies for AFC Ajax. There are
values proposed for both players and bigger clubs. First, the club offers players
a fully equipped club facilities for their improvement, from the youth academy
to the first team. Players are also offered a completely professionalized
training process before they become professional players. Secondly, AFC
Ajax offers a value of talented players for bigger clubs, who proved themselves
by contributing for club’s success on competitions.
5.2.1.6 Customer Relationship
Social media is the major platform for clubs to keep in touch with their fans
and inform them about special offers. In the case of AFC Ajax, the biggest
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communication platform is Instagram. (Figure 17) As it is illustrated, AFC
Ajax’s Instagram presence has the biggest interaction capacity among four
channels, so the amount of capacity is 10,774,000 followers. (Figure 17)
5.2.1.7 Channels
Despite AFC Ajax competes in Eredivisie, the fourth least popular league, the
club participates in the Champions League. (Figure 18) The club’s most
important channel is the Champions League, where top tier teams participate
among all over the Europe. For this reason, Champions League matches are
followed by other clubs’ scouts; so, AFC Ajax can attract them if it plays good
football. Therefore, the Champions League is an important channel for AFC
Ajax to market its players, as well as an opportunity where players can prove
their talents to bigger clubs.
5.2.1.8 Cost Structure
Transfer expenses are one of two expenses in the cost structure of AFC Ajax.
However, the other expense of club facilities is at the forefront, comparing to
the transfer expenses. Despite this, club facilities (including youth academy)
constitute most of the cost structure, as its essential for the player development.
As its illustrated in “Figure 16”, the club has spent only 35.57 million € for six
players, and other five player did not cost any money. Thus, the club spends
so much on its own facilities, rather than transferring players abroad
5.2.1.9 Customer Segment
AFC Ajax’s customer segment is separated into two groups: Clubs, and fans.
Clubs hereby addressed to rich, big clubs, that never hesitate on spending
money. This kind of clubs are potential buyers of AFC Ajax’s players, if they
run a good form and prove their potential. On the other hand, players’ form is
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relevant with attraction of fans. Fans get motivated if the club plays a good
and enjoyable football, so they keep follow their team on/off the field.
5.2.2 Sport Entrepreneurship
AFC Ajax has created a system that is centered around player development.
Differently from an ordinary club, AFC Ajax discovers players when they are
young. These discovered players join to the club youth academy by going
through a selection process. The club starts to track their progress since the
first day they entered to the youth academy. Not every player can make their
way to the first team, so there is some risk portion. In other words, players’
potential and talent are not same among each other. Nevertheless, AFC Ajax
profits mostly from its players with youth academy origin. AFC Ajax’s ‘Sport
Entrepreneurship’ context is based on player development from youth
academy, sell at the right time, and replace the sold ones from youth.
Therefore, it continues like a cycle for the club.
5.2.3 Porter’s Five Forces Framework
According to the ‘Porter’s five Forces of Framework’, as it is defined in the
“Theoretical Framework”, low shares of other stakeholders come up to the low
power of supplier power. The lack of brand awareness for AFC Ajax
(depending on Eredivisie’s brand value), would cause a ‘threat of entry’ for
the clubs from top 3 most valued leagues of England, Spain, and Germany.
(Figure 18) For this reason, AFC Ajax is followed less than clubs from these
three leagues; so, its performance is unknown in the Champions League.
Moreover, AFC Ajax has a potential to cause “threat of substitution” for those
clubs as well; because its performance in tournaments (such as UEFA
Champions League) may attract audiences from elsewhere (or may even steal
attraction from other clubs).
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The attractiveness of the club players with high prices are relevant with their
good football. In other words, providing enjoyable football to audiences
reveals players’ talents, and attributes. This attracts people to follow the club,
as well as other club directors. In the scale of people, following frequency is
directly proportional with club’s success, which scales the “Supplier Power”.
5.2.4 Human Capital
AFC Ajax sets its goal to be at the top of Eredivisie and the Champions League
as predecessors of its icons (Johan Cruyff, Edwin van der Sar etc.). To do so,
the club has constructed a player-centric system. In other words, the club’s
system is focused on ‘Human Capital’, so players represent the human capital
here.
AFC Ajax’s successes in Eredivisie, and being participants of the Champions
League, motivates players with the opportunity to play in an international
arena. In other words, players are aware of the possibility to move to a bigger
club if they perform well in the Champions League. For this reason, players
are eager to make progress and benefit from club facilities since they join the
club.
On the other hand, the club incorporates talented younglings to its youth
academy. The club tracks each of these players’ progress since their first time
entering to AFC Ajax. Players, that show promising development, are
promoted to the first team. Once a player has promoted to the first team from
youth academy, its his responsible to work hard. Meanwhile, the club must
provide the circumstances for its players’ development. Therefore, the club
sells players when the right time comes, and makes profit as an outcome of
‘Human Capital’ development.
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Discussion
In this part, two representative case studies are summarized, and authors
define their own implications from case studies. These implications are given
as significance in four different groups.
The summary of two case studies show two different approaches of
entrepreneurship through their own human capital. One scouts players and
other one raises them through its youth academy. In the end of these two
entrepreneurial approaches, these two clubs gain huge profits from their
players.
The results demonstrate that two different approaches of value creation out of
young talents adopted by AFC Ajax and Borussia Dortmund have various
impacts on these clubs and generate different results. In the case of Borussia
Dortmund, the club adopted scouting method to discover the hidden gems of
football. In other words, they scout unfamed-but-promising players, and
present them to the European football arena. There are various cases presented
in the analysis, which proves Borussia Dortmund’s scouting capacity.
Borussia Dortmund’s entrepreneurial approach is based on scouting, as the
club makes a significant transfer profit from each player.
AFC Ajax is another practitioner of entrepreneurship, which prioritize youth
academies. AFC Ajax’s transfer policy is based upon its youth academy; so,
the club sells players that have been recruited from the youth academy more
than scouted ones. The analysis of this club has indicated that the club has not
spent on transfers at all. In fact, the club has a successful youth academy, that
allowed many young talents to shine. To sum, in both cases clubs can increase
their incomes thanks to their entrepreneurial approaches to economic value
creation from human capital.
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6.1 Significance of Youth Academies in Value Creation
Youth academies are mainly significant for clubs’ sportive success. Quality of
youth academies are directly proportional with the quality of players as an
outcome. As examined in the case study, value of youth academies has a
positive effect on the recruitment of football players and club success.
Although, youth academies can be considered as an investment for long-term
along with its player outcomes. Clubs can even build the backbone of their
starting eleven by players from youth academies. These players can whether
serve to their clubs for a long term, or make their clubs earn money by being
sold to another club.
From the economical perspective, as previously mentioned, young players can
be a source of profit depending on their performance. In other words, these
players can provide financial stability to their clubs, depending on their
progress. For this reason, clubs save money from their transfer budget, and
replace gaps in the squad from their own academies. As it is given in the case,
AFC Ajax exemplifies an entrepreneurial approach by investing on youth
academy, makes profit from players.
6.2 Significance of Scouting and Human Capital
Human capital has been a driven force for success. Thus, its quality is
correlated with the possibility of success. In terms of football clubs, scouts and
players are part of human capital. These two aspects have a strong bond
between each other: Scouts discover players and bring to the club. The quality
of scouts is directly related with the quality of discovered players.
Scouting is one of the most important aspect of player investment. Bring
undiscovered talents to the transfer market, and profit by them, is a way
followed by football clubs. Increasing price of fully developed players, and
FFP rules, motivate football clubs to do scouting. Football clubs aim to
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contribute on scouted young players' development, sell them in a reasonable
price, and create financial resource.
As it is examined in the Borussia Dortmund case, the club became successful
and got financially secured by investing on scouting young players. The risk-
taking behavior of football clubs (investing in undiscovered players'
development) is an example of entrepreneurship.
6.3 Significance of Club Structure
The presence of a club structure is essential for them, which shapes their
managerial reaction towards potential competitors. This reaction can be
considered as a strategic decision, that may have whether long- or short-term
effects. For this reason, a club’s structure must be supported with a strong
business approach.
Entrepreneurial approach towards potential competitors can improve clubs, so
creative solutions can be generated in line with this approach. A club can
particularly position itself with each action taken relevantly to this approach.
For instance, identifying and analyzing competitors before planning, can be
beneficial to clubs. In this way, clubs can take their next step depending on its
surrounding opportunities and threats.
As it is examined in the case, both clubs do plan in accordance with their
strategy. Both clubs became successful and financially stable. For example,
AFC Ajax have a strategy of about recruiting their own players from youth
academy. Their CEO and former coach state that club structure has shaped
according to player recruitment.
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6.4 Significance of Sport Facilities
Sport facilities such as training grounds and gyms are very important for the
clubs as they are the places where the players practice. Given the importance
of the facilities, a club with developed facilities can positively contribute to a
player’s career. Along with training grounds, a player’s development can be
completed with experienced coaches and a training program, which is
correlated with the “significance of human capital” as well.
For instance, in the case of Borussia Dortmund, the club built its
entrepreneurial business model with the significant reliance on human capital
and sport facility. As they come up with their scouting ability, the quality of
their scouting outcomes is enhanced by their spot facility quality. Thus, a
player is recruited via scouting, that player goes through trainings through
Borussia Dortmund and ends up with achieving a certain quality.
In the second case of AFC Ajax, the club’s successful youth academy has a
well-quality sport facility beyond. Once a youngling enters through the doors
of AFC Ajax, the club has much to offer him for his long career journey.
Therefore, sport facility is all about how much a club offers for players’
improvement in terms of training opportunities. Thence, the quality of sport
facility directly contributes to players’ progress, and these two are directly
propotional with each other.
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Conclusion
In this chapter, authors hereby to present their conclusion with limitations,
and suggestions to future researchers. Conclusion consists of key findings
from the research and answers to the research question. Limitations and
suggestions are based on the experiences from the research process.
7.1 Key Findings
In the beginning, this thesis elaborates the significance of entrepreneurship for
football teams. In terms of significance, factors that drive football teams to be
entrepreneurs are introduced. Football has been a rapidly growing sector, thus
there is a challenging competition amongst football clubs. Roman Abramovich
(the owner of Chelsea FC) is one of the examples of commercialization in of
the football industry, along with Manchester City and Paris Saint Germain that
are also sold to multi-billionaire businesspeople. Football clubs spend
tremendous amount of money to create strong squads and aim to win national
football leagues and other organizations such as UEFA Champions League to
raise their market value and gain the rewards of these tournaments. The
remarkable financial gaps amongst football clubs made UEFA to adopt the
FFP regulations in order to curb the financial inequality problem deriving from
multi-billionaire football clubs.
Considering the objectives and RQs of this study, two representative case
studies of Borussia Dortmund and AFC Ajax reveals different approach of
“Footballpreneurship”: scouting and youth academy. AFC Ajax and Borussia
Dortmund enrich their squads by following these two approaches. Then, they
sell players when the right time has come. The way a player joins these clubs,
whether by scouting or youth academy, has a profitable return for the club.
Consequently, when we get back our research questions of “How did the
regulations on the football clubs such as FFP affect the business patterns of
the European football clubs?” and “How did different entrepreneurial
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approaches impact the clubs structure of AFC Ajax and Borussia Dortmund
in the context of value creation?”, they are answered through the certain
theories stated in the analysis. Two different perspectives of player discovery
and recruitment are given additionally within the analysis. Despite of different
approaches, they have similarities in creating economical value from their
players. This fact is directly connected with entrepreneurship, as the risk
existence is valid for every new ventures. Summing up all these facts prove
the existence of entrepreneurship for every football teams, and clubs can
become entrepreneurs by creating value from players which is called by
Footballpreneurship by the authors of this master thesis.
7.2 Limitations
The authors have encountered several limitations during this research. These
limitations affect the working process, as well as the timeline. Hence, facts
that have been challenged this research are indicated below:
Communicating a top football club has been the major limitation to this
research. It was challenging to reach the football clubs that have been
the subjects to the case study.
The data collection method of this study has been affected as the
Covid-19 pandemic made impossible to travel, as well as made
difficult to carry out face-to-face interviews.
Most of the football teams keep their secondary data in private, which
limit data source options. The research remained in a narrower scope
due to this fact.
Despite of having certain theoretical frameworks are chosen, football
teams do not have an official framework. For example, the business
model canvas has been made by individual implications, so there are
none official business model canvases belong to football teams.
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As the research is obliged to use secondary data, the methodology has
been affected. In this sense, the scope of methodology remained
narrow, so opportunity of using many methods has unfortunately been
dismissed.
Lack of previous research on this subject and literature limited the
scope of this study.
7.3 Recommendations for Future Research
The authors hereby to give their suggestions to future researchers, who may
follow the similar context. These suggestions came out from authors’
experiences faced under the research process, and are mentioned down below
to help researchers:
Interview with youth academy staffs would level up any possible future
research, which may give insight about youth academies’ structure and
their contribution on player development. On the other hand,
interviews can lead to new research gaps, which may be worthy to go
on.
Interviewees should be determined in advance, as well as their
alternatives. In the case if primarily planned interviewees are
unreachable, alternatives can be tried to contact; thus, alternative
interviewees should be as many as possible.
Other teams can take place of Borussia Dortmund and AFC Ajax, so it
is possible to gravitate into other clubs.
Football industry has various managerial branches and activities, such
as merchandising, to define “Footballpreneurship” from another scope.
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Timetable
This section gives the entire timeline of the working process for the thesis. The
entire timeline consists of 20 weeks; which is equivalent to one semester.
Figure 19: Timetable
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