Corporate Strategy and Diversification
Corporate Strategy and Diversification
Corporate diversification strategies raise a wide range of strategic management issues. For this week’s critical thinking assignment, read the case study found in your textbook: Case 16: Manchester City: Building a Multinational Soccer Enterprise, p.554 (in the textbook).
Remember, a case study is a puzzle to be solved, so before reading and answering the specific case and study questions, develop your proposed solution by following these five steps:
Read the case study to identify the key issues and underlying issues. These issues are the principles and concepts of the course module, which apply to the situation described in the case study.
Record the facts from the case study which are relevant to the principles and concepts of the module. The case may have extraneous information not relevant to the current module. Your ability to differentiate between relevant and irrelevant information is an important aspect of case analysis, as it will inform the focus of your answers.
Describe in some detail the actions that would address or correct the situation.
Consider how you would support your solution with examples from experience or current real-life examples or cases from textbooks.
Complete this initial analysis and then read the discussion questions. Typically, you will already have the answers to the questions but with a broader consideration. At this point, you can add the details and/or analytical tools required to solve the case.
Case Study Questions:
Under what circumstances can a company extend its competitive advantage from its home market to an overseas market? Issues concerning the transferability and replicability of the firm’s competitive advantage are critical here.
What are the distinctive features of City Football’s strategy? What mode of foreign market entry should City Football adopt? Why? Again, issues of resources and capabilities and the need for local market knowledge, distribution, and political and business connections become critical here.
What criteria can companies apply in deciding what new diversification to pursue and which should City Football apply in deciding?
What changes in the financial structure, organizational structure and management systems would you recommend?
Case 16 Manchester City: Building a Multinational Soccer Enterprise
In August 2008, Manchester City Football Club (MCFC) was acquired for £210 million (€262m) by Sheikh Mansour bin Zayed Al Nahyan, a businessman and member of Abu Dhabi’s ruling family. The change in ownership marked the beginning of a new era for Manchester City and its long-suffering fans. Between August 2008 and January 2018, Manchester City spent £1,350 million on acquiring new players and £250 million on new facilities—a level of investment unmatched by any other European club. In 2012, MCFC was crowned champion of the English Premier League—the frst time in 44 years—and from 2012 to 2018, it was the most successful club in British soccer. However, the rise of Manchester City has not simply a story of a super-star team built on Middle Eastern wealth. Between 2008 and 2018, Manchester City’s owners created an organizational structure and management system that was unlike that of any other soccer club. City Football Group Ltd. (CFG) was formed in May 2013, initially to take ownership of MCFC, but also to act as a holding company for a global portfolio of football investments. By 2018, CFG had equity stakes in six football clubs on fve continents, alliances with seven other football clubs, and a management system for leveraging these relationships. The key question, both for CFG and for those football clubs that lacked such scope, was: could such a global portfolio, backed by an international management system, really enhance the competitiveness of the individual soccer clubs?
Manchester City Football Club
MCFC was founded in 1894, but for most of its history lived in the shadow of its neighbors, Manchester United. In 2007, former prime minister of Thailand, Thaksin Shinawatra, purchased the club but, amidst intensifying legal diffculties, he sold the club to Sheikh Mansour in 2008. Mansour, who had been considering the purchase of an English Premier League club for several years, was attracted to Manchester City because of its location, its history, its new stadium (built with government fnance to host the Commonwealth Games in 2004), and the real estate potential of the derelict land surrounding the stadium. In addition, Abu Dhabi’s national airline, Etihad, had started fying to Manchester in 2006 and was considering expanding its presence there. From the outset, it was clear that Mansour was a hard-headed investor rather than an indulgent football enthusiast. At the same time, Mansour’s vision for MCFC was not limited to fnancial return—he was inspired by FC Barcelona whose emphasis on values, youth development, and community involvement, as well as its artistic, attacking football, had conferred upon it a unique status as a club. With Mansour’s business partner, Haldon Al Mubarak, installed as chairman of MCFC, the initial stages of a turnaround program were implemented: ? New players. Beginning with the purchase of Robinho for £32.5 million, MCFC invested £188 million in players and other assets during the frst year under the new ownership. By the end of the 2011–12 season, £452 million ($695 million) had been spent on acquiring 22 new players (at an average price of £22 million). ? New coaches. In seeking a coaching staff capable of integrating MCFC’s star-studded squad into one of Europe’s most successful teams, Mansour and Al Mubarak employed a succession of internationally experienced coaches with successful track records: Mark Hughes (June 2008–December 2009), Roberto Mancini (December 2009–May 2013), Manuel Pellegrini (June 2013–June 2016), and Pep Guardiola (from July 2016). ? Facilities. Soon after buying MCFC, Mansour and Al Mubarak began planning a fully integrated training, entertainment, and administrative complex alongside the stadium. Brian Marwood, a former Arsenal player and Nike executive, designed the new training facilities by adopting the best features of other clubs’ facilities and drawing, in particular, on AC Milan’s Milanello training complex. The Etihad Campus was opened in 2014. It housed training facilities for all the club’s teams, from age-group sides to men’s and women’s senior squads. It included 16 football pitches, a 7000-seat stadium for academy and women’s teams, a 50-seat auditorium for reviewing video, 4-star accommodation for players and their families, retail stores, and CFG’s administrative headquarters. The frst-team’s facilities feature a hypoxic chamber where players can run at altitude or in extreme temperatures, a hydrotherapy area for treating injuries, and a hydro treadmill with underwater cameras. The complex also accommodates the Beswick Community Hub whose facilities include a leisure center for local residents, a sixth form college, and the Manchester Institute of Health and Performance. The addition of a third tier to the South and North stands of the main stadium increased its capacity to 61,000.
City Football Group Ltd.
The Abu Dhabi United Group, which Mansour created as a vehicle for acquiring MCFC, became its parent company. However, Mansour’s interests in football were not limited to Manchester City. By 2012, he was already looking elsewhere for investment and development opportunities. To manage these interests, City Football Group Ltd. (CFG) was created as a holding company, headquartered at Manchester City’s Etihad campus, to manage Abu Dhabi United Group’s worldwide footballing investments. Internationalization began in 2013 with in the creation of a new US Major League Soccer franchise—New York City FC. Manchester City executives pioneered the initiative and CFG took an 80% equity stake. In 2014, CFG acquired the Australian A-League club, Melbourne Heart (which was renamed Melbourne City FC), a 20% stake in Japan’s Yokohama F. Marinos, and Club Atlético Torque in Montevideo, Uruguay. In 2017, Girona FC in Spain’s La Liga was acquired. Table 1 shows the football clubs owned by CFG and those with which the CFG has co-operation agreements.
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