4.3. Swot-Analysis

Table 4.1. SWOT-analysis Manchester United

Strengths Global support and following Most valuable global sport team Stable and highly visible revenue streams and strong and consistent growth Professional commercial operation with highly successful track record Highly developed and professional football infrastructure Experienced management team	Weaknesses Dependence upon the performance and popularity of the First Team Significant indebtedness European competitions cannot be relied upon as a source of future income Unconstructive outlook
Opportunities Increasing interest to European football in USA and Asia Emergence of global football club partnerships	Threats Strong competition from other football clubs Recently-proposed UEFA restrictions An increase in the relative size of salaries or transfer costs

STRENGTHS

Global support and following. Manchester United benefits from strong support across the globe. According to the research conducted by TNS Sport in 2007, United has 139 million core fans and 333 million followers.⁴⁹ It has approximately 54,000 general admission season ticket holders, approximately 7,500 executive members and, as at 31 December 2009, United had approximately 102,000 One United club members. Old Trafford is the largest football club stadium in the United Kingdom and average attendance for Premier League matches has been approximately 99% for each season since the 1997/98 season.⁵⁰

Most valuable global sport team. In 2009, Forbes named Manchester United the most valuable sports team in the world and valued at $1.9 billion.⁵¹

Stable and highly visible revenue streams and strong and consistent growth. Between 1 July 2005 and 30 June 2009 Manchester United achieved a compound annual revenue growth rate of 19.0% and a compound annual EBITDA growth rate of 26.5%.⁵² It also expanded the seating capacity of Old Trafford in 2006 with the addition of approximately 7,400 seats which, when combined with increases in ticket prices over the last five years, has underpinned consistent growth in ticket sale revenues. Moreover, United have benefitted from increases in the value of media rights for premium sports content in general and for football in particular.

Professional commercial operation with highly successful track record. Part of United’s growth has been achieved as a result of company’s successful commercial operations. These operations are set within a developed infrastructure that encompasses a team of approximately 45 people dedicated to commercial activities. In particular United have built a dedicated sales team, which focuses on developing commercial opportunities and sourcing new sponsors.⁵³ As part of its commercial operations United seeks to systematically consider potential sponsors within key product categories and it pursue a mix of global and regional sponsorship arrangements.

Highly developed and professional football infrastructure. Manchester United has a highly developed and professional football infrastructure. Moreover, over the last 16 years Manchester United has made significant investments at Old Trafford to expand capacity and improve the facilities available at the stadium. They have also developed a number of hospitality suites and added several entertainment facilities and restaurants.

Experienced management team. Underpinning all of United’s strengths is its experienced and motivated management team. The management team has a broad range of experience and expertise covering professional football management, stadium management and commercial, financial, entertainment, football and regulatory matters.

WEAKNESSES

Dependence upon the performance and popularity of the First Team. Manchester United revenues and, therefore, their ability to meet their obligations under the Notes, are dependent upon the performance and popularity of the First Team. Significant sources of revenue are the result of strong performances in domestic and European competitions, because United’s income varies significantly depending on the First Team’s participation in these competitions.

Significant indebtedness. Manchester United has significant amount of indebtedness. On 30 September 2009 United had more than £513 million.⁵⁴

European competitions cannot be relied upon as a source of future income. From the one side of a coin, participation in the Champions League generated significant revenues. But from the other side, failure to qualify for the Champions League or even poor performance would result in not only a material reduction in revenues, but also it would negatively affect United’s ability to attract or retain talented players and coaching staff, as well as supporters and sponsors.

Unconstructive outlook. Currently, the club is so flourishing and now works on such a huge level that there is a distressing estimation that the club now lost its origins and it is no longer concerned with the game of football, but all about proceeds. Such unconstructive outlook might have a harmful effect on the fans. Even though Manchester United performs well, this may not bring about too much apprehension for the club, as it has global support, however, it is still required to be taken into account.

OPPORTUNITIES

Increasing interest to European football in USA and Asia. European football is getting more attention in American and Asian markets. This represents potential development of the clubs’ brands. The key opportunity for Manchester United at the moment is the penetration to new markets, especially to the American one. There is an opportunity in the proximate future to structure the coalition with one of the world's most well-off team in sports, the New York Yankees. This will signal enormous merchandise channels in America, and provide Manchester United the lead over all other Football teams in the American context, presenting their product to a new market. Even though there is a superior risk concerned tendering United’s products over to the US, then entering the existing market, by reason of the coalition with the Yankees, this danger is condensed.

Emergence of global football club partnerships. In addition to the global coalition with, for example, the New York Yankees, Manchester United can also make a deal with other football clubs especially in organizing football academies, scouting and players’ exchanging.

THREATS

Strong competition from other football clubs. Manchester United faces strong competition from other football clubs in England and Europe. In the Premier League, recent investment from wealthy team owners has led to teams with strong financial backing. As the Premier League continues to grow, the interest of wealthy potential owners may increase, leading to additional clubs substantially increasing their financial strength. Competition from European clubs also remains strong. Other European football clubs are spending substantial sums on transfer fees and player salaries. Competition from inside and outside the Premier League has led to higher salaries for United’s players as well as increased competition on the field.

Recently-proposed UEFA restrictions which could adversely affect United’s business. UEFA has proposed certain spending restrictions on clubs participating in the Champions League and Europe League competitions. Known as the ‘‘financial fair play’’ initiative, the proposed restrictions would, among other things, disqualify from European competitions any club whose costs and capital expenditures on players exceed its revenues over a three year period. These rules are intended to discourage clubs from continually operating at a loss. There is a risk that, in conjunction with increasing player salaries and transfer fees, the financial fair play initiative could limit Manchester United’s ability to acquire or retain top players and, therefore, materially adversely affect the performance of its First Team.

An increase in the relative size of salaries or transfer costs. Success of Manchester United depends on its ability to employ and retain the highest quality players and coaching staff. As a result, United is obliged to pay salaries generally comparable to our main competitors in England and Europe. Over the past three years, salaries for players and coaching staff have increased significantly. If there is a continued increase in the level of salaries paid to top players and coaching staff in general, United may be required to increase the salaries it pay to avoid losing key members of the playing and coaching staff. Further increases in salaries may adversely affect company results of operations.