Financial performance and corporate diversification strategies in professional football – evidence from the English Premier League

Abstract

<jats:sec><jats:title content-type="abstract-subheading">Purpose</jats:title><jats:p>Professional football clubs have increasingly initiated two corporate diversification strategies to enfold growth opportunities besides traditional income sources: business diversification and international diversification. Empirical findings from management and sport management literature provide inconclusive evidence on these strategies' financial performance effects, necessitating further research. The purpose of this article is therefore to investigate how both corporate diversification strategies affect the financial performance of professional football clubs.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title><jats:p>A 15-year panel data set of English Premier League (EPL) clubs is examined, many of which have employed corporate diversification strategies. Measures for related business diversification (RBD) and unrelated business diversification (UBD) as well as international diversification are established from management literature. Based on fixed effects regression models, their effects on clubs' revenues and profitability are then examined.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Findings</jats:title><jats:p>U-shaped effects from RBD on revenues and profitability are found, but no effects from UBD. These findings empirically support the theoretically appealing superiority of RBD over UBD and, with increasing levels of RBD, over a focused strategy in management literature. With international diversification, an inverted U-shaped effect on revenues is identified.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Research limitations/implications</jats:title><jats:p>Despite focusing only on the EPL, these findings provide new evidence of non-linear financial performance effects from corporate diversification strategies adding to (sport) management literature and setting the stage for future research on these strategies in professional football.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Practical implications</jats:title><jats:p>These findings have significant implications for club managers' strategic growth opportunities such as new business models or geographic markets.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Originality/value</jats:title><jats:p>This is the first study to empirically examine the financial effects of corporate diversification strategies in the football market context.</jats:p></jats:sec>

Business management in the football industry from a supply chain management perspective

“…Football matches are services, and therefore, SCM can be used. Clubs' diversifications have increased their global footprint and further enhanced their financial opportunities (Holzmayer and Schmidt, 2020). Football clubs are hybrid organisations with partial commercial and public logics incorporated, but also have a unique third elementsporting achievement as an entertainment factor.…”

“…Table 6 describes the comments on the actor/link. The FSC can be defined as a network of suppliers, football clubs, fans and other supporting units which creates value by offering the product of football events and matches to customers (Chopra, 2019;Dolles, 2013;Holzmayer and Schmidt, 2020;Lee Sheng, 2017;Liu et al, 2017;Lonsdale, 2004;Marjoribanks and Farquharson, 2016;Marquetto et al, 2017;Scafarto and Dimitropoulos, 2018;Serrano et al, 2019a, b;Rosandich, 2008;Timchenko et al, 2017). According to Egilsson (2017), who that believed FSC is the management of information, processes and resources in the entire FSC for the adequate provision of services to final customers and effective management of the whole chain.…”

“…As the financial heartbeat of the football industry (Perechuda and Pawlak, 2017), clubs are influenced by the flow of players and their necessary growth and development. They are simultaneously influenced by sponsors, fans, spectators, media and society (Dolles, 2013;Holzmayer and Schmidt, 2020;Lee Sheng, 2017). Furthermore, clubs enter mutually beneficial advertising deals with sponsors.…”

“…In the football industry, there are numerous uncertainties in demand patterns associated with the impossibility of storing services, thus posing challenges to managers. The concept of the possibility of an outcome is a central conjecture in the economics literature on professional football clubs (Egilsson, 2017;Holzmayer and Schmidt, 2020;Scafarto and Dimitropoulos, 2018). As a result, football clubs must have coordinated demand management strategies.…”

“…Therefore, the flow of these resources must help the club realise its goals while also meeting financial fair play standards (G€ urel et al, 2013;Scafarto and Dimitropoulos, 2018). SCM is an approach that can improve fair commerce through efficient CFM (Holzmayer and Schmidt, 2020;Karjalainen and Moxham, 2013). Therefore, CFM in the FSC can reduce costs, increase effectiveness and efficiency and generally increase profits for all stakeholders (Egilsson, 2017), while also serving as a vessel for implementing financial fair play in football.…”