Your company strategy is critically important to growth, but what can you do when threatened by your competition? You can either maintain your current strategy or evolve in response to market changes.
This year’s summer football transfer window was a fascinating example of businesses adapting their strategies to moves by the competition to hopefully leave them with a competitive advantage and a stronger market share. Here are a few points to consider and examples of where clubs acted on them.
Arsenal attracted the headlines at several points over the summer. Firstly for announcing a transfer war chest, secondly for attempting to acquire Liverpool’s biggest asset, Luis Suarez, and finally for breaking transfer and wages protocol to attract record signing Mesut Ozil from Real Madrid. So what was the strategic rationale behind each decision and how does it leave Arsenal in relation to its competition?
As a club with a reputation for prudence when others around have spent hundreds of millions, each move was a clear deviation from the strategy followed in recent seasons. The first move was motivated by a need to pacify its stakeholders; fans and shareholders who had become frustrated with the club’s inability to compete needed to be convinced of Arsenal’s determination to succeed. It was impacting the bottom line through slow season ticket sales and key commercial negotiations were being undermined.
The move for Suarez would have strengthened Arsenal, but also weakened rivals Liverpool, with clear commercial aims. Qualification for the Champions League is worth £7.3m, with qualification to the last 16 earning another £3m. Not to mention the unquantifiable commercial value of a global audience who watch the games. Unsurprisingly, Liverpool resisted, no doubt hoping their star asset will help them secure those bonuses next year.
Signing Ozil, a player of undoubted quality, but not in an area of the team deemed to be under strength means the transfer can be seen in the context of the first move – it is a statement of intent that the club is able to compete with big clubs again. Apparently shirt sales are twelve times higher than usual, so the investment appears to be paying off.
Chelsea’s acquisition of Willian under the noses of rivals, Spurs, is an excellent example of a defensive strategy. This move denies the competition the chance to improve as much as it improves Chelsea, which could be crucial for Champions League qualification and generating turnover. When Spurs failed to qualify for the Champions League, they saw a £5m swing in profitability, filing a £4.3m loss in July 2012.
Manchester United’s success relies on its dominance of the English league. It has helped the business crack the Asian market, but changes at the top, notably the exit of Sir Alex Ferguson and David Gill, the chief executive have demonstrably weakened United’s position in the market. Ed Woodward and David Moyes struggled to operate with the same kudos and lost out on key targets to Arsenal and Bayern Munich. As such, the value of the brand has taken a hit as others perceive there to be a weakness at the top and market share could have slightly decreased.
So, what can businesses operating in less glamorous markets learn from this activity?
- Understand your true position in the market. Are you a leader? If so, what can you do to protect your position? This could mean an acquisition or a key hire to make a statement of intent. If you’re a competitor, can your strategy better reflect your agility and capacity to offer a personal or bespoke service?
- Try to understand your competitors’ strategies. Is there a new sector of the market that your competitors have targeted or deliberately avoided? How will their moves affect your strategy and how can you capitalise or defend against it?
- Maximise the marketing impact of strategic decisions. Don’t be tempted to keep everything strategic internal. If you’ve got good news, make sure you share it with stakeholders like employees, shareholders and customers. Many football clubs use the media very successfully to spread good news stories and cultivate a sense of ambition.
Of course, these clubs are ultimately judged by their performance on the pitch. However, as these clubs have demonstrated, the two sides of the business are interdependent, with off-field investment generally translating into on-field success.
This is a theme Whitecap Consulting will be exploring in more detail at our inaugural event ‘Ignite Your Business’ being held at the First Direct Arena, Leeds, on 20 September.
For more information about Ignite Your Business click here.