Real Madrid Summary Company: Real Madrid Strategy: 1. “Professionalize” the management team 2. Exploit the enormous value of the Real Madrid brand and players’ images to increase revenues. 3. Impose financial discipline to ensure that the team did not become overextended. Key to this discipline was limiting the players’ expense. With the new strategy of Zidanes & Pavones, Real Madrid would sign one star player per year and focus on the development of players through the farm system or cantera. Issues: 1. On the brink of bankruptcy. 1990’s Crisis: (Growth in revenues from TV rights; Greater investment of private personal fortunes; free-agent market) 2. Clean the debt by selling a training ground 3. Key to transformation would be modernization of its management. * Restructured the organization into four main units. * Implementing a variable pay structure. 4. Leveraging the Brand * Widen the scope of the brand by targeting international markets * New code of conduct promoted the values of honesty, transparency, and concurrence. * Three ways to exploit the brand:1. Sponsorship, image rights, advertising; distribution, merchandising, and licensing; and internationalization and new technologies. * Zidanes & Pavones 5. The Budgetary Process * Annual plan& midterm plan * Guidance of the strategic objectives and the assumptions provided by the corporate manager .
* Revenue: Real Madrid transformed some areas of the stadium into VIP sections; preseason, international and exhibition games; TV rights; marketing revenues----attract additional sponsorship or player-endorsement deals * Expenses: payroll had been growing steadily over the past few years as new megastars joined the team; operating expenses also increase; Depreciation increased as the Club capitalized improvements to the stadium and the construction costs of “Ciudad del Real Madrid”; Transfer fees will decided by the end of the season, cause accelerated amortization.
Introduction Real Madrid received the award of the world’s most successful soccer club due to its multiple wins: thirty one national leagues, nine European Cups and sixty other championships. Although Real Madrid is currently ranked forth of top fifteen professional soccer clubs in 2003, followed by Manchester united (1st place), Juventus (2nd place), AC Milan (3rd place). (See Appendix: Figure 1) To catch up with competitors, Real Madrid set three interrelated goals: (1) increase financial flexibility; (2) assemble a team of top players; and (3) expand Real Madrid brand across a variety of channels. This paper will address the goals of developing local players to save the enormous forward fees and to soften financial bills, and enhancing mobile & social media to expand internationally and to increase number of Real Madrid fans as well as revenue. SWOT Analysis The club recognition, number of fans and number of victories are the most important strengths of Real Madrid. On the other hand, the team strategy of acquiring the top soccer players can be seen as a weakness in that the club spends millions of euro to focus on team’s performance. However, the team should maintain this acquisition strategy but also focus on developing in a more efficient way as Brazilians and Argentina soccer teams do. The development of new talents and extension of the recognized brand to other soccer-related activities are opportunities for Real Madrid that could improve their revenue. The balance of talented soccer players, expert coaches and loyal fans are essential for Real Madrid’s successes. Real Madrid is facing enormous threats of victories and recognition for opposing teams. (See Appendix: Figure 2) For example, FC Barcelona, another Spanish soccer team, is one of Real Madrid’s most challenging competitors. One of FC Barcelona’s superstars is Lionel Messi, originally from Argentina, who currently is ranked first in the world, followed by Cristiano Ronaldo from Real Madrid and Neymar from Santos. Having professional performance soccer players to play for Real Madrid is important. If fans prefer the super player of another team, they may switch their loyalty easily. Increase the number of fans & Develop local players
In Soccer, the number of fans defines the target market, so it is intimately related to revenue. Triumph is an essential factor because this encourages fans to go to the stadium, buy branded goods and increase television audience. The number of fans is a result of social exposure and its popularity within a family. Children follow their parent’s footstep, and they become fans of the same team. As a child, it is easy to change team allegiances; as an adult, it is more difficult to switch teams because one is easily labeled as a traitor or a non-committed individual. As an adult it is very difficult nearly impossible to change teams because one is easily labeled as a traitor or a non-committed individual. Therefore, Real Madrid should market more in the children sector. For example, create a webpage special for kids with games; encourage soccer at the schools; soccer camp; "the soccer parks" Real Madrid’s strategy to seize and earn titles has to do with purchasing the best players in the market. In 2000 during the Florentino Perez administration, the club created “The Galácticos”, super star soccer players who aided Real Madrid in winning important games. The key players of the “Galácticos” were: Luís Figo (60 million euro from Barcelona) – who joined in 2000; Zinedine Zidane (76 million euro from Juventus) – who signed in 2001; Ronaldo (43 million euro from Internazionale) – who joined in 2002 and David Beckham (35 million euro from Manchester United) – who later joined in 2003. From 2000 until the present time, Real Madrid has spent millions of euro on talented soccer players, with its last acquisitionCristiano Ronaldo from Manchester United-costing 96 million euro. Instead of acquiring super star players, Real Madrid could focus more on developing new talent. Other countries, such as Brazil and Argentina continue to develop local talents as opposed to investing in well-known players. For example are Ronaldo Kaká, Robinho, Ronaldinho, Roberto Carlos. Real Madrid could develop a sponsorship that encourages children to play soccer; a strategy that invests in raising potential superstars as well as encourage local school teams and sponsor promising players. Mobile & Social Media Real Madrid’s strength is in their numbers. They rely heavily on their fan base because without their fans, they amount to nothing. Having great players and winning games is just a part of the soccer world. Loyalty to a team is commitment that is lasting. Over the years, many soccer teams try to win as many fans as possible and keep the remaining ones happy. They promote themselves through buying star players, having successful winning streaks and selling t-shirts. Now they need to engage their fans worldwide. The only way to do this is through the New Media 360° approach. We reach our audiences using the different online tools such as Facebook, Twitter, YouTube, Google+, and Tumbler. We would also approach these using the mobile app interface on smartphones. In doing so, we will improve our access to get safer and faster communication connection as possible. We would collaborate with STC to discover faster technologies. We would focus on a Multilanguage and multiformat app that works with java, iPhone, Androids for the fans worldwide. It will allow users to access: classification, schedule, exclusive contests, results, videos, news, chats, 3D Goals,
messenger, ticket sales, fidelity program and sales of jerseys. Once we move in this direction and become successful, we can earn untethered consumers who rely on their peers for recommendations and they trust the recommendations of others more than the promotional messages from the companies that make or market the products. This system of user opinions goes beyond social networking as consumers reach out to networks of others who may have purchased a particular item, heard certain music or seen specific videos. All the information can be accessed real time. Because we want our fans to feel that they belong to something larger and to make it personalized, we will mobile-empower them or M-powered! They can sign in at any time to watch live stream of games and discussions, vote on polls, enter to win a signed jersey, and bet using BWIN. A great example would be someone who cannot watch a game because they need to work but can fetch the latest score from his phone. Or maybe while a husband goes shopping with his wife in a mall, he goes shopping online with his phone. We M-power them to stay loyal, feel a great sense of belonging and continue to speak of our name with great pride and prestige. Because where ever they are, Real Madrid is right there. Real Madrid is everywhere. Expand internationally Real Madrid has the opportunity to globalize soccer in Japan, China, and the United States. They can do this by sponsoring activities in schools, host tournaments, and set up retail stores in malls. We would like to gain popularity with children by sponsoring physical education classes in schools. From elementary to college, we can provide soccer equipment and jerseys as well as host after school leagues. Real Madrid can also host soccer tournaments and bring a celebrity, such as a celebrity soccer player, actor, or high ranking official, to host and sign autographs. We can set up special soccer sessions to teach soccer and host soccer matches for students to go to after school. In addition to targeting children at all school levels, Real Madrid can host city-wide Adidas sponsored tournaments that anyone at any skill level can join and be part of. There will be tournament weekends where 20-30 teams can compete where the winning team has the opportunity to win a trip to the World Cup. We will get a celebrity or celebrity player to host the event. We will utilize our most popular sponsors such as Adidas, Siemens Mobile, and Pepsi by promoting our tournaments by using their advertising. In China and Japan, because we know education is important in their culture, it would be beneficial to focus more on celebrity sponsored tournaments and celebrity soccer games a few times a year. Another angle Real Madrid would like to take is to promote soccer fields similar to skate parks for skate boarders. For major metropolitan cities where space is limited such as in Tokyo and Hong Kong, soccer fields can be placed upon roof tops using astroturf instead of actual grass. This gives children the opportunity to play where space is not as available. We
would ask our sponsors to contribute for the funding of these fields to help promote their label and Real Madrid. We need to strengthen our brand by selling Real Madrid soccer-related items such as soccer balls, jerseys, caps, watches, clothing, and shoes in retail stores in malls and in souvenir shops in airports. This would be our most profitable strategy because we increase brand visibility. Along with our other strategies we hope this will broaden our consumer base by giving them more opportunities to purchase and represent Real Madrid. Appendix Position Club Income(€m) 1 Manchester United 251.4 2 Juventus 218.3 3 AC Milan 200.2 4 Real Madrid 192.6 5 Bayern Munich 162.7
• What is the Real Madrid business model? Is it unique? • Who are Real Madrid’s customers? How is the market segmented? • Who has more power, Real Madrid or the players? • What risks does Real Madrid face?
We should not forget that the club’s capacity to generate revenues is determined by the team’s success on the soccer field e consider it impossible to achieve sporting success without obtaining a good economic performance. Yet.
A club’s success on the soccer field is associated with the club’s associated with the club’s capacity to acquire, sign up, and keep the best players on its books, as these players are resources that are the basis for building capabilities. Furthermore, football stars are a scare resource they are professionals that have all the ingredients to allow them to be considered as strategic assets. Consequently, acquiring these soccer resources- a highly qualified professional staff- can only be done at extremely high costs and rel ying on the club’s healthy finances. To accomplish this objective, t is fundamental for the club to achieve an adequate
financial balance, forcing the club to constantly explore new income sources, something which the club can achieve through diverse and various means, with the enhancement in value of the “Real Madrid” brand proving to be the most effective.
The sporting strategy is founded on two main courses of action: signing up soccer pla yers with a significant media impact, and promoting the club’s “nursery”, that is, its young players program. The brand name of Real Madrid
