Real Madrid - The Business

Real Madrid - The Business

1. Analyze Real Madrid's business strategy using the value chain and competitive forces models. Why has the team been so successful?

Value chain analysis: [1]

Primary activities:

Operations - Here we can consider all the activities related with the team, including played games. We can think about a game as a performance, which the team sells among other things. Every time the team enters the pitch, Real Madrid is producing a product that sells.

Marketing and Commercialization - Clearly this is where Real Madrid focuses its activity. We can refer the way the club takes advantage of the player's image to promote itself and make money. The Real Madrid name is treated as valuable brand such as Coca-Cola for instance. Real Madrid offer's its products in its own stores and makes it possible to distribute its products over other distribution channels like the web.

Service - In this topic I consider important to refer all the service provided to the members of the club. Being a member has some benefits, like having access to tickets at a low price. The web-site has a section dedicated to the "socios".

In these primary activities I don't consider the inbound or outbound logistics, since it seems that it doesn't apply to this kind of organization.

Support Activities:

Administration and Management - We can point out here the structure of the organization, and the executive staff composed by experienced managers. A good management team is a key element to achieve success. The internal organization reflects the club needs and every team knows exactly what it is expected to do.

Human- Resources - I would refer here the policy of professionalize the management team, but also very important the existence of internal mechanisms that evaluate employee performance making it possible to reward and recognize the good work. This system suffered some changes to be more transparent and fair, so the employee motivation can increase. Motivated employees are a success factor.

Technology - In this topic, we can refer how Real Madrid is using the new technologies to promote its image and brand. I'm speaking about the web-site for

instance. We also can refer how an advanced MIS is supporting the internal activity, by making it possible to integrate all the different systems that are incompatible otherwise.

Procurement - I think we can refer here how Real Madrid buys its main actives: the players. The club bases its decisions in some marketing factors when it comes to superstar signing, and tries to unveil as soon as they can if a young player can one day be part of the main team.

We can also analyze Real Madrid strategy with Porter's five forces model. [2]

While it is difficult to a club reach the level of Real Madrid, it is not complete impossible. I would refer here a known case study of a new entrant, an English premiere league club: Chelsea FC. Under new management the club has been growing both as a team and a business. Many changes were also implemented including an image revamp, but Chelsea FC success is based in good sport results. Although Chelsea is not a competitor of Real Madrid or Manchester United yet, it is growing and is starting to compete specially with Manchester United that plays in the same league.

Mentioning suppliers, we can think about the power that the producers of sports equipment or travel agencies (to manage regular club flights) have when it comes to bargain a price for the service. I think that this power is not very high, and so this force is not the first menace to the clubs success.

When it comes to customers, if we consider two types of customers such as members and fans and institutional clients such as the sponsors (if we see sponsors has client of the club's image), this force is one to pay attention for. As a whole fans have great power in the clubs life because they provide the club with resources. Also the sponsors can have a word, when it comes to provide the team with large amounts of sponsorship, compensations can be asked.

When it comes to identify substitute products we must look to the club products as entertainment products, and if we do so the possibilities of substitute products are countless. Just to refer some, we can have music concerts, cinemas, theaters and other types of sports. So this force plays an important rule when it comes to define the club strategy.

The traditional competitors are also an important force to consider. There's a strong competition among some clubs like Real Madrid and Manchester United for fans. The more fans a club fans have the wealthier it can be. This competition does not stay in the pitch, since games between them are not frequent, but outside the stadium in the market ground, competition is high.

Finally to summarize this answer I would say that the team under a competent management and with motivated employees has been able to keep its clients happy and promote football passion among them avoiding substitute products, making it possible to surpass its direct competitors. That's the reason why the team has been so successful outside the pitch.

2. Describe the role of management in Real Madrid's business strategy.

Changes in Real Madrid began exactly within the management team. The

professionalism of the management team was seen as a fundamental strategic issue. It was the president of the club himself, who stated this when describing his approach. This change would lead to better decisions and better management.

The new management took some important actions in different areas in order to cause the growth of the club, not only in the sportive field but also as a business.

One important measure was taken in respect to image rights, both the club and its players. The new system takes advantage of the commercial potential of the Real Madrid brand and its players images giving the club an important source of revenue.

Financial discipline was other important philosophy introduced by the new president. Developing a culture that avoids unnecessary expenses helps the club maximize its profits.

The salary policy, in respect to employee compensation, as well as the performance-measurement mechanisms was revised, not only to improve equity within the organization but also to rationalize expenses with employee remuneration.

Finally the new management recognized the importance and potential of international markets, so high importance was given to internationalization and actions were