Sport Economics & Finance

1. Introduction

Based in Old Trafford, Greater Manchester, England, Manchester United is one of the world’s most well-known and successful football clubs. Newton Heath LYR Football Club, the organisation’s original name when it was created in 1878, was replaced by Manchester United in 1902. A record 20 League titles, 12 FA Cups, three European Cups, and numerous other significant trophies have been won by the club during its long and famous history (Szymanski, 2019). Because of its well-known brand worldwide, sizeable revenue sources, and sophisticated financial management procedures, Manchester United was chosen as the case study for this paper. One of the most expensive sports organizations in the world, Manchester United, is currently valued at over $4 billion. The club’s financial information is also easily accessible because it has been publicly traded on the New York Stock Exchange since 2012 (Dobson and Goddard, 2019). Therefore, examining Manchester United’s financial information and management techniques can offer essential insights into a significant sports organisation’s economics and finance.

2. Revenue Streams and Cost Analyzing

Revenue Streams of Manchester United (in millions of pounds):

Cost Analysis of Manchester United (in millions of pounds):

Benchmarks used to measure and manage profitability and performance include:

1. Gross profit margin: This indicator shows how much money is left over after subtracting the direct costs of items sold. Better profitability is indicated by a higher gross profit margin (Morrow and Gillibrand, 2019).
2. Net profit margin: The percentage of income left over after all costs, such as taxes and interest, have been paid is known as the net profit margin. A higher net profit margin indicates better profitability.
3. Return on investment (ROI): This metric assesses the club’s investment’s profitability. An increased ROI denotes improved financial success.
4. Debt to equity ratio: This gauges how much debt the club has taken on to fund its activities. A lower debt-to-equity ratio indicates better financial stability.

Use key performance indicators/ratios to evaluate the financial performance.

The key performance indicators support Manchester United in successfully evaluating its financial performance by engaging the members and the facilities and engaging them to achieve a positive outcome. The implementation supports the team in reaching milestones, gauging development, and making effective decisions to increase financial performance and advances at the most advanced and appropriate level. The KPI of the Manchester Sports Club helps achieve the objectives and the milestone in the EPL by engaging the team members better to achieve success and generate revenue to impact operational performance and financial success positively. The KPI helps the Sports club make strategic decisions to better manage the environment and situation to bring good achievement and financial performance (Brannagan et al., 2022).

3. Micro and Macro Environmental Factors

Identify micro and macro environmental factors that may have influenced the organization’s or club’s financial performance.

The microenvironment supports the Sports Club of Manchester United to successfully focus on the internal elements to understand the micro factors better.SWOT analysis is the best way to understand the micro aspect (Meier et al., 2022).

Swot analysis 

Macro Factor

PESTEL analysis 

Pestel analysis is the most appropriate way to understand Macro element and factors.

Political factor- Government policies and regulations significantly impact the sports clubs and the events that have been managed because the government can provide funding or tax incentive to support the entire sport in the structure and its development. The political stability helps the sports club in generating good financial performance.

 Economics factor- during the sports event, the sale of tickets, sponsorship, broadcasting, and licensing will help to create good finance where, as inflation and recessions negatively impact the performance, that impacts the club’s financial health (PARDOMUAN, 2022).

 Social factor- The social culture, such as cultural values and people’s behaviour, impacts the sports event.

 Technology factor- The advanced technology helps the players to gain a better experience and bring innovations as well as create possibilities to generate good financial performance

 Legal factor– Support understanding the contract disputes and regulatory compliances.

 Environmental factor –The sustainable practices of the sports club bring a positive impact in the sector that motivates using renewable energy sources.

Discuss how these factors impacted the organization’s or club’s financial management practice and performance.

It evaluates the micro and macro factors of Manchester United to help to understand these elements that play a significant role in bringing better performance both at the national and the international level and helping to generate good financial performance.

4. Season/Period Review

Please review the latest season or period, including financial performance and factors that may have affected it.

Manchester United’s financial result brought profit after the covid-19 and successfully positively impacted the people through the commercial ads. It makes money and generates good financial performance by monitoring the micro and macro factors and making effective decisions by focusing on the three main elements that are discussed below-

Commercial revenue-  The sponsorship, retail merchandising, apparel, and license in the most critical effective commercial sector to generate revenue and bring a positive impact on the financial performance of Manchester United because it motivates people to buy the club Jersey and other merchandise when the club is going to compete with the opponent team. The most important and influential element helps the club generate good revenue.

Broadcasting revenue- Broadcasting revenue successfully monitors the T.V. revenue during the English Premier League (EPL) performance and positively impacts the substitution charges. At the same time, the audience prefers to watch their favourite team play.

Matchday revenue- The matchday revenue is also positively impacted because millions of fans were coming by tickets to watch the game, which positively impacts the financial performance.

5. Other Financial Key Points

Discuss other relevant financial points crucial for the organization’s or club’s financial management practice and performance.

Assets that include machinery and infrastructure are examples of economic success elements. The revenue generated by a business ought to be controlled and profits guaranteed via successful financial operations. Given the highest customer value, the administration must understand the financial information they gather and store to offer competitive rates (Tashpulatov., 2022). Finance’s duty in an organization is to ensure that all cash is located in the appropriate place at the right time. A corporation aspires to be equipped with sufficient revenue to satisfy its current bills while investing for future growth. Financial management processes regulate how you conduct daily operations, complete every month’s finance close-up, contrast actual expenditures to projected expenditures, and guarantee businesses fulfil auditor and tax obligations.

Financial management is concerned with maintaining the organization’s position in the market. This accomplishes this by establishing a framework for boosting the financial part of investors and shareholders. An organization’s principal goal is to function successfully and maximize earnings while stifling the economy (Toshboyeva., 2022). Appropriate allocation of funds entails guaranteeing all the resources required are accessible to accomplish the intended results. Cost control refers to maintaining operating expenses as low as possible to maximize earnings. Economic capital structure: Establishing an efficient method for managing current and potential obligations, equity, and additional financial instruments.

6. Comparative Analysis

Conduct a comparative analysis with other similar sports businesses to evaluate the organization’s or club’s financial performance.

Manchester United and Manchester City become competitors because they are based in exact locations, as they’ve done since 1881. Manchester United was typically considered the more influential group, but they were humiliated after being eliminated by City in 1973, resulting in their demotion (Brannagan et al., 2022). Manchester United has 46 objectives and 37.5 efforts on target for this campaign. Manchester City had 78 goals, including 37.53 attempts on target. Manchester United’s top two scorers are Marcus Rashford (15 scores) and Bruno Fernandes (5 scores).

Manchester United represents Britain’s most widely recognized as well as well-supported club. Manchester United has the most significant following of the two big Manchester teams, having developed a worldwide reputation due to Ferguson’s squads’ accomplishments during the 1990s and 2000s. According to a new study, Manchester United’s worldwide base of supporters has more than quadrupled to 659 million individuals. Manchester United is one of the globe’s biggest-selling football clubs, and its popularity as a worldwide brand has brought about more rich advertising arrangements (Scelles et al., 2022). The club’s overall sponsorship earnings in 2021 are expected to be about 194 million dollars in United States dollars. Manchester City With over 330 locations globally, Great supporters could confidently gather to exchange wonderful City memories while supporting their favourite club matter anywhere. Erling Haaland is now Manchester City’s leading goalscorer. He leads the English Premier League with 32 scores.

7. Recommendations for Improving Financial Performance

The recommendations listed below can help Manchester United’s financial performance moving forward based on the study of its financial data:

1. Diversify Revenue Streams: Despite the club’s successful commercial and sponsorship revenue streams, there may be chances to further diversify revenue sources by forming new alliances and securing new sponsorships. Exploring new industries and revenue streams, like esports, can also open up new revenue streams.
2. Control Costs: The team should prioritize cost management by making the most of player contracts, keeping track of stadium expenses, and cutting running costs when it is practical. The club’s profitability and financial stability can be increased by putting in place a more effective cost-control strategy.
3. Enhance On-Field Performance: Manchester United’s on-field success has a big impact on earnings, especially on match days. Revenue and profitability may rise if the club performs better and earns Champions League qualifying.
4. Leverage Digital Platforms: To interact with fans and make money, the club should keep using digital platforms like social media and e-commerce. Reach a larger audience, this can involve developing new digital products and services.
5. Optimize the Use of Debt: Although the club has a sizable amount of debt, making the best use of it can assist finance expansion and investment. The club’s ability to finance future expansion prospects and maintain its financial stability can be enhanced by prudent debt management.

8. Conclusion

A field of finance called “sports economics” concerns how economics relates to sports. This includes both approaches to studying the unique organizations of sports that economists may use. Sport may contribute significantly to community development, promoting economic progress and fostering personal improvement. In general, sports encourage the growth of communities by increasing exposure, including visibility, money, and employment opportunities. In addition to the proven fact that getting involved in sports boosts economic activity, the growth of the sports industry has a favorable effect on the financial system, not just in terms of the manufacturing of sporting products but additionally on the industry overall, creating more jobs. Sport provides a sense of collective identity management, unifying societies on a regional and worldwide scale, and may be utilized to develop ethical and moral principles across the community. Sports have the potential to break through societal boundaries and preconceptions, including biases.

9. References

Azhar, A.A.A., Hisham, B.E.B. and Bakar, N.A.A., 2022. Using the Enterprise Architecture Approach to Analyse the Current Performance of Manchester United Football Club. Journal of Techno-Social, 14(1), pp.28-36.

Brannagan, P.M., Scelles, N., Valenti, M., Inoue, Y., Grix, J. and Perkin, S.J., 2022. The 2021 European Super League attempt: motivation, outcome, and the future of football. International Journal of sport policy and Politics, 14(1), pp.169-176.

Brannagan, P.M., Scelles, N., Valenti, M., Inoue, Y., Grix, J. and Perkin, S.J., 2022. The 2021 European Super League attempt: motivation, outcome, and the future of football. International Journal of sport policy and Politics, 14(1), pp.169-176.

Dobson, S., and Goddard, J., 2019. The economics of football. Cambridge University Press.

Meier, H.E., García, B., Konjer, M. and Jetzke, M., 2022. The short life of the European Super League: A case study on institutional tensions in sports industries. Managing Sport and Leisure, pp.1-22.

Morrow, S., and Gillibrand, D., 2019. Financial management in football: An analysis of the revenue streams and cost structures of professional clubs in England. Soccer & Society, 20(6), 867-882.

PARDOMUAN, P.J., The Business Model Analysis of European Football Clubs: A Study Case of The World’s Top 5 Most Valuable Brands.

Scelles, N., François, A. and Dermit-Richard, N., 2022. Determinants of competitive balance across countries: Insights from European men’s football first tiers, 2006–2018. Managing Sport and Leisure, 27(3), pp.267-284.

Szymanski, S., 2019. Money and football: A Soccernomics guide. Nation Books.

Tashpulatov, F.A., 2022. Student Sports as a Factor in the Preparation of Highly Qualified Athletes. European Journal of business startups and open society, 2(2), pp.18-23.

Toshboyeva, M.B., 2022. Normalization of Loads in Physical Education and Sports. EUROPEAN JOURNAL OF BUSINESS STARTUPS AND OPEN SOCIETY, 2(2), pp.49-52.