FOOTBALLPRENEURSHIP MASTER THESIS, 30 CREDITS - DIVA
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Master Thesis, 30 credits
Footballpreneurship
The role of scouting and youth academies in football
entrepreneurship and value creation from young
talents: A case study on AFC Ajax and Borussia
Dortmund
Author: Aydin Can Firildak, Hakan Akin
Supervisor: Anna Alexandersson
Examiner: Malin Tillmar
Term: Spring 2020
Subject: Business Administration
Level: Advanced level
Course code: 5FE060E
Abstract Background: The football industry has been rapidly evolving. The value of transfer market has increased astronomically, thus sealing a transfer deal has become pricy. In the meantime, the gap between rich and low budget clubs keeps increasing. UEFA released new regulations called “Financial Fair Play” (FFP), which aims to curb financial differences amongst football clubs. Hence, football clubs adopted new entrepreneurial approaches such as scouting and youth academies to improve their financial situation. Purpose: The main objective of this paper is to understand football teams’ entrepreneurial reaction towards FFP. The purpose is to examine the strategies of value creation from human capital like talented young players, in terms of scouting and youth academy, and explain the relationship between football and entrepreneurship in context of the business model framework. Method: The research is conducted by secondary data collection through online resources. We used the secondary data analysis method to analyze our data and carried out a representative case study based on the theoretical framework of this master thesis on two football clubs, AFC Ajax and Borussia Dortmund, to understand the problem more comprehensively. Conclusion: The results of this study demonstrate that the FFP regulations affected the entrepreneurial structure of football clubs. The data suggest that both clubs intensified their scouting and youth academy activities, as a result they generated more transfer revenue through selling the players that they recruited at their youth academies or scouted. Hence, this new entrepreneurial approach that the football clubs adopted provided a significant benefit for them. We call this concept that football meets entrepreneurship as “Footballpreneurship”. Keywords: football entrepreneurship, business model, sport entrepreneurship, youth academy, scouting, human capital
List of Abbreviations EPL – English Premier League FC – Football Club FFP – Financial Fair Play FIFA - Fédération Internationale de Football Association UEFA – The Union of European Football Associations
Acknowledgments We would like to express all our acknowledgements to certain people for their contribution to our thesis. Firstly, we would like to express our gratitude with all respect to our tutor Anna Alexandersson, who has guided us through the entire semester with her worthy inputs. We would not achieve this without your support. Secondly, we would like to thank our examiner Malin Tillmar and our fellow classmates for providing constructive comments to improve our thesis. Lastly, we would like to present our endless thankfulness to our families, who made us become Linnaeus University graduates possible. Without them, we could not be here and write this thesis. Sincerely, Hakan Akin and Aydin Can Firildak 17th of August 2020
Table of contents Introduction 1 1.1 Background 1 1.2 Problem Statement 6 1.3 Purpose 7 1.4 Research Questions 8 1.5 Outline 9 Methodology 10 2.1 Research Strategy 10 2.2 Research Design 11 2.3 Research Method 12 2.4 Data Collection 13 2.5 Data Analysis 16 2.5.1 Secondary Analysis 16 2.5.2 Case Study 17 2.6 Research Credibility 18 2.7 Ethical Considerations 19 2.7.1 Copyrights 19 2.7.2 Data Management 19 2.8 Summary 20 Theoretical Framework 21 3.1 Business Model 21 3.2 Sport Entrepreneurship 30 3.3 Porter’s Five Forces Framework 31 3.4 Human Capital 35 3.5 Summary 36 Results 37 4.1 Borussia Dortmund 37 4.1.1 Shareholder Structure 37 4.1.2 Revenue Structure 38 4.1.3 Transfer Data 40 4.1.4 Social Media 42 4.1.5 Secondary Interviews 43 4.2 AFC Ajax 46 4.2.1 Shareholder Structure 46 4.2.2 Revenue Structure 48 4.2.3 Transfer Data 49 4.2.4 Social Media 50 4.2.5 Secondary Interviews 51 4.1 Brand Value of the European Leagues 54
Analysis 55 5.1 Borussia Dortmund 55 5.1.1 Business Model 55 5.1.2 Sport Entrepreneurship 58 5.1.3 Porter’s Five Forces Framework 59 5.1.4 Human Capital 59 5.2 AFC Ajax 61 5.2.1 Business Model 61 5.2.2 Sport Entrepreneurship 64 5.2.3 Porter’s Five Forces Framework 64 5.2.4 Human Capital 65 Discussion 66 6.1 Significance of Youth Academies in Value Creation 67 6.2 Significance of Scouting and Human Capital 67 6.3 Significance of Club Structure 68 6.4 Significance of Sport Facilities 69 Conclusion 70 7.1 Key Findings 70 7.2 Limitations 71 7.3 Recommendations for Future Research 72 Timetable 73 References 74 9.1 Online references 80
Table of Figures Figure 1: Outline of the thesis ...................................................................... 9 Figure 2: Secondary data collection ............................................................ 14 Figure 3: Literature collection .................................................................... 15 Figure 4: 10 Criteria of Credibility ............................................................. 18 Figure 5: Summary of Methodology ........................................................... 20 Figure 6: Summary of Theoretical Framework ........................................... 36 Figure 7: Shareholder Structure (Borussia Dortmund) ................................ 38 Figure 8: Revenue percentage for 2018-19 (Borussia Dortmund) ............... 39 Figure 9: Revenue in Euro (x1000) (Borussia Dortmund) ........................... 40 Figure 10: Last 5-year Transfer Report (Borussia Dortmund) ..................... 41 Figure 11: Eleven most profitable transfers (Borussia Dortmund)............... 41 Figure 12: Social media (Borussia Dortmund) ............................................ 42 Figure 13: Shareholder structure (AFC Ajax) ............................................. 47 Figure 14: Sales per Businesses (AFC Ajax) .............................................. 48 Figure 15: Revenue from departed transfers (AFC Ajax) ............................ 49 Figure 16: Eleven most profitable transfers (AFC Ajax) ............................. 50 Figure 17: Social media (AFC Ajax) .......................................................... 50 Figure 18: Brand value of top tier European football leagues in 2019 ......... 54 Figure 19: Timetable .................................................................................. 73
Introduction
This section introduces a background to the thesis with key concepts
definitions to give better understanding to readers about the research. It is
followed by the problem statement, where it answers the following question of
“why is this context worth studying?”. Purpose is given to introduce the
authors’ aims and intentions on doing this thesis. Lastly, research questions
close this part, given with a couple of questions that are answered by authors
throughout this thesis.
1.1 Background
The authors will describe some main concepts regarding the thesis. Various
resources are used to back up authors’ current knowledge on these concepts.
References from these sources harmonized authors’ knowledge and shaped the
background.
Entrepreneurship is the discovery, evaluation, and exploitation of
opportunities for the creation of future goods and services (Shane and
Venkataraman, 2000). According to Ratten (2010, cited in Radaelli et al.,
2017, p.72) sport entrepreneurship is about innovation and risk-taking
behaviors to discover and exploit new markets, product opportunities and
human capital. Another definition indicates that, sports entrepreneurship is a
field of research that focuses on the contributions of sport organizations in line
with the decisions made by communities, organizations, and individuals
(Radaelli et al., 2017). The history of sports entrepreneurship goes back a long
way. Porter and Vamplew (2018) state that, until the ancient Greeks and
Romans, athletes competed for only their honor, without any profit-making
purpose. Afterwards, sports became a business over time. Towards the end of
the 19th century, the teams in North East England turned the clubs into
businesses to compete with other teams (Porter and Vamplew, 2018, p.633).
1(82)According to Porter, who investigated two centuries of sports entrepreneurship
history, sport is always connected with the business, and it has evolved over
time to identify itself as business (Porter and Vamplew, 2018, p.630).
“In the rapid changing global business environment, innovation and change
is a fundamental focus of sport.” (Ratten, 2010, p.57). Nowadays, every sector
is influenced by the technological and scientific development, which affects
the sports industry as well. In the sport industry, where the competition is high,
developments have affected each branch and have led to a difference on their
approach. Sport games are considered highly competitive, so club teams are
forced with different understanding to get ahead of others. Professional
sportive competitions create a unique environment for developing
entrepreneurship theory, because clubs are to explore and use opportunities to
compete, survive, grow and win (Radaelli et al., 2017, p.70). As stated in Dietl,
Franck and Lang (2008, p.353), economy is one of the important features that
draw a distinction between teams in professional sports. The economic success
of clubs affects their sportive success, which increases the gap between
average and high-earner teams.
Developments in the sports industry in recent years, have particularly affected
the football industry. The football industry is influenced by these
developments on two main trends, commercialization, and professionalization
(Enjolras, 2002, cited in Forslund ,2016, p.374). In recent years, the fact that
the football world has been rapidly evolving from a sport to an industry is an
indicator (Dolles and Söderman, 2013). Many football teams in Europe started
to be targets for investors after football developed quickly and clubs started to
produce high income (Birkhäuser, Kaserer and Urban, 2017). One of the best
examples of commercialization in football, Roman Abramovich (Russian
businessman), who bought Chelsea F.C. (an English professional football
club) in 2003, has invested a tremendous amount of money in the club. The
assets such as broadcasting rights, merchandising, season tickets, transfer
2(82)revenues and branding, which are obtained by professional football teams,
encourage initiative. As clubs’ revenues from fans and followers increase,
football becomes a growing market over time, as in the case of Abramovich.
This yields football into a more commercial dimension, such as with the new
multi-billionaire owners of Manchester City F.C (an English professional
football club) and Paris Saint-Germain F.C. (a French professional football
club).
With the new game-changing club owners and development of the industry,
the football market has also started to evolve. Transfer fees of players have
reached astronomical figures. The purpose of all clubs is to have the best
football players, and to participate in the UEFA Champions League, which is
also known as the European Cup (the highest tier tournament in Europe), and
to be successful there. The Union of European Football Associations (UEFA)
distributes a certain amount of money from the “market pool” to the
participating teams, and according to various criteria such as the television
market of these teams and other factors (Plumley and Flint, 2015, p.247).
Football teams aim to create the strongest squad, become winners, increase
their prestige, and strengthen economically. Clubs spend huge amounts of
money to gather the best and the most talented players and to be the winner at
the end of the season (Ascari and Gagnepain, 2010). Abramovich’s first season
in Chelsea F.C. (2003/2004) spent 169.70M Euro of transfer fee within a year
(Transfermarkt.co.uk, 2020). Manchester United, which was one of the biggest
English professional football teams in those years and finished the previous
season (2002/2003) as the English Premier League (EPL) champion, spent
56.53M Euros on transfer in that season (2003/2004) (Transfermarkt.com,
2020). This led to an increase in the gap between big teams and medium-sized
teams.
UEFA executive committee created the Financial Fair Play (FFP) concept in
2010 to prevent the worsening financial conditions and imbalance in European
3(82)club football (UEFA, 2020). Additionally, it was updated according to the
changes in the football environment periodically in 2012, 2015 and 2018,
based on principles and objectives remaining the same. The general objectives
of this rule are:
“to further promote and continuously improve the standard of all
aspects of football in Europe and to give continued priority to the
training and care of young players in every club”
“to adapt clubs’ sporting infrastructure to provide players, spectators
and media representatives with suitable, well-equipped and safe
facilities”
“to improve the economic and financial capability of the clubs,
increasing their transparency and credibility”
“to encourage clubs to operate on the basis of their own revenues”
“to encourage responsible spending for the long-term benefit of
football”
“to protect the long-term viability and sustainability of European club
football” (UEFA, 2020, p.2).
With this regulation it was aimed to close the gap between the large and mid-
sized clubs. According to this rule, the big clubs cannot transfer only by paying
plenty amount of money. In fact, there should be a balance in the transfer price
between the players they sell and buy. These rules pushed football teams to
invest in cheap and young football players or their facilities to recruit their own
players to bring into balance.
Many clubs have to create a new model on these developments within football.
The goal is to create a proper plan and suit it to the club interests. The
financially conservative teams follow a supplier model to big clubs and try to
take advantage of rich clubs’ desire for talent players (Andreff, 2006, p.692).
After increasing player prices, it has become important to discover and train
4(82)young players (Dolles and Söderman, 2013). Young players from all over the
world have increased in importance for football teams in Europe and have had
consequences for recruitment and development strategies for clubs that play
an important role in their competition (Bullough and Coleman, 2019). For
example, FC Nantes (a French professional football club) and AJ Auxerre (a
French professional football club) generated a significant source of income
from the sale of young players to other clubs, so they are considered the
suppliers of players in Europe (Andreff, 2006). This created a “long-term”
model for these clubs because they raised their own players and enabled them
to sustain their financial situation (Söderman, 2013). Söderman (2013, p. 168)
likens clubs’ player recruitment to the sale of semi-finished products in the
biotech industry. For example, David Beckham first signed an internship
contract with Manchester United in 1991, and in 2003 signed a 4-year contract
with Real Madrid worth 35M Euro (Dolles and Söderman, 2013). Such
examples have encouraged other clubs to give the same importance to
infrastructure. Many clubs have begun to structure the youth academies more
professionally, such as medical and sports science support, administration, and
education (Dolles and Söderman, 2013).
In the football transfer market, football teams review talented players to
become more competitive (Andreff, 2006, p.695). In addition, according to
Andreff (2006) they earn more money from these players and increase their
chance to participate in a European competition. This caused teams to create a
new system. Therewith football teams invest millions of euros in the scouting
system to discover talented players and retain them before their competitors
(Radaelli et al., 2017, p.71). Porto FC (a Portuguese professional football
team) is one of the best teams applying scouting transfer in Europe, which
gained £538.25M from scouting transfer between 2007/2008 and 2017/2018
seasons (Graves, 2020).
5(82)1.2 Problem Statement
Here in this section, authors define element(s) worth research in this thesis. In
other words, authors are hereby to answer the following question of “What is
the problem that needs to be identified?”. This section is the definition of the
problem to be further researched.
Ascari and Gagnepain (2010) define football leagues as nationwide contests
that contain several clubs competing against each other within a specific
period. The reasons why football teams win or lose, profit or loss, are related
to the differences between the clubs and their different levels of performance
on the pitch and the strategy they have developed and how they are managed
(Dolles and Söderman, 2013).
Although football teams want to create the best team, though spending vast
amount of money, their incomes and expenses must be balanced, due to the
FFP regulations. In addition to this regulation, a football team has the right to
transfer as much as the profit it receives from a player they sell (UEFA, 2020).
This obligation causes football teams to turn to least costly undiscovered
football players. Thus, the youth academies and scouting become strategic for
football teams.
In fact, clubs (or their decision-makers) are driven to use their resources
efficiently and create value out of that. This approach brings entrepreneurship
as an option for clubs. Hence, entrepreneurship is embraced by the executive
of football teams to solve their financial problems and increase their incomes.
At this point, players take an important place in the football organization
because developing and exploring football players allow their clubs to vary
from their competitors. The performance of football teams and the evaluation
of the teams represent the interventional cycle in football organizations
(Radaelli et al., 2017).
6(82)Football teams, with or without financial struggles, are driven to generate new
ways of income. Football teams began to research and develop less costly
models to close the gap between economically strong teams. This thesis will
examine how football teams produce a solution against the change in the
football industry.
1.3 Purpose
The authors state their motivation of focusing into the topic of
“Footballpreneurship”. The authors reason their intention for the research.
In other words, this section stands for the definition of their purpose and
messages that they are expecting to give to readers.
This paper will investigate the entrepreneurship and value creation from
human capital in the context of youth football academies and scouting
activities. Accordingly, everything belonging to a football team is considered
as assets by the authors, especially football players. Football players are the
most important assets of football teams, and a player may become professional
after being recruited at a youth academy or may be scouted by a club.
Eventually, the young player who is talented can be a source of income for
clubs.
A comparative analysis on two different football teams, AFC Ajax, and
Borussia Dortmund, is carried out to achieve the objectives of this master
thesis. One of these teams, AFC Ajax, is famous for the youth academy; while
the striking feature of Borussia Dortmund is its scouting system that
discovered numerous talents. The purpose of this comparative analysis is to
understand the problem of this master thesis and achieve its objectives through
answering the research questions that are stated as following.
7(82)Objectives:
1) Understanding the role of scouting and youth academies in European
football teams in terms of creating economic value out of young
talents.
2) Comparatively analyzing the approaches of two different European
football clubs to young player recruitment through scouting activities
and youth academies, in the case of AFC Ajax and Borussia Dortmund.
3) Assessing the entrepreneurial patterns of football clubs in the context
of business model.
1.4 Research Questions
There are two research questions given, which shapes the whole research
process to answer it in this thesis. Answer to these questions shaped through
various research methods that will be described in the next sections in detail.
The following RQs are formulated to achieve the objectives of this master
thesis.
1) How did the regulations on football clubs such as Financial Fair Play
affect the business patterns of European football clubs? (Responses to
O1, O3)
2) How did different entrepreneurial approaches impact the club
structures of AFC Ajax and Borussia Dortmund in the context of value
creation? (Responses to O2)
8(82)1.5 Outline
• Methodology
Chapter 2 • This section contains selected research methods for the thesis
• Theoretical Framework
Chapter 3 • This section presents theoretical framework regarding to
Footballpreneurship
• Results
Chapter 4 • There is an presentation of the collected data
• Analysis
Chapter 5 • This chapter interprets collected data under given theories
• Discussion
• This chapter summarizes the analysis with authors' own
Chapter 6
implications
• Conclusion
Chapter 7 • This chapter answers the reseach questions
Figure 1: Outline of the thesis (own implications)
9(82)Methodology
This section outlines authors’ research under four chapters. Starting with a
description of two main research strategies obtained as basis. Followed by
research design, defining the way of how three main approaches shape the
thesis. ‘Data Collection’ and ‘Data Analysis’ parts conclude the
‘Methodology’ section by giving an insight about authors’ ways of collecting
and analyzing data. This thesis is based on secondary data, so there is no data
sampling method has been followed.
2.1 Research Strategy
Quantitative research is identified as a research method, which highlights
quantification and analysis of numerical data collected (Bryman, 2012). The
ability of interpreting mathematical graphics, comes out from results, can be
possible by quantitative research. This research method is adopted due to its
significance for interpreting secondary data. In the light of quantitative data,
authors would be able to understand and analyze the graphical and numerical
data presented in the results chapter.
Quantitative researches are characterized as engrossed with implementing
measurement steps to social life whilst qualitative researches are active in
words to present society analysis (Bryman and Bell, 2015). Each research from
two strategies mainly concerns different perspectives. However, at the end of
the day, two strategies are common at interpretation of visual data (Bryman
and Bell, 2015). In terms of engaging with numbers, this research interacts
with numerical secondary data; thus, authors will perform a quantitative
research.
Qualitative research is considered as a research strategy that underlines
qualification and analysis of verbal data obtained (Bryman, 2015). The
capability of interpreting published interviews comes from qualitative
10(82)research. In this research, qualitative data collected from related interviews,
which are supportive to numerical data analysis. This research strategy is
embraced due to the need of interpretation of published interviews.
Bryman (2012) states that qualitative research is consistently correlated with
theory generation. As it is stated, the thesis has concluded with the authors’
opinions, which are results of an approach that is shaped in the authors' mind.
There is no quantification in the qualitative research; thus, authors will benefit
from this approach for the collection of published interviews. Inputs from
published interviews will be reduced depending on usage, as qualitative
research concerns about data reduction of large scales of data (Bryman and
Bell, 2015).
Authors embody a qualitative approach along with its counterpart, quantitative
approach. In this sense, these two opposite approaches are considered as two
puzzle pieces that complete each other. For instance, empirical material
contains both numerical and verbal data, which requires two different
approaches at the same time. As previously mentioned, interviews do not have
quantification, and graphs do not have qualification.
Correspondingly, there are qualitative and quantitative data included in the
results chapter; where quoted interviews represent ‘qualitative’, and rest of the
graphs represent ‘quantitative’ data. The presence of two different data types
obliged to have multiple research strategies at the same time. For this reason,
qualitative and quantitative methods are defined under this section. Therefore,
their usage together shapes this thesis’ research strategy as “Mixed Methods’.
2.2 Research Design
Abductive logic sparked upon the necessity when inductive and deductive
logics are insufficient on certain points. Abductive logic answers the question
of ‘what it might be’, so it approaches problems from a creative perception.
11(82)Dunne and Martin (2006, p. 518) indicates that “The designers who can solve
the most wicked problems do it through collaborative integrative thinking,
using abductive logic, which means the logic of what might be.” Abductive
approach is considered as a problem-solving tool for designers to solve wicked
problems or create something that does not exist. “Whereas a designer uses
abductive reasoning to say, ‘What is something completely new that would be
lovely if it existed but doesn’t know?’” (Dunne and Martin, 2006, p. 514). On
the other hand, abductive data is a bridge between the two ways of thinking.
Martin (2009, p. 29) indicates that “…abductive logic sits squarely between
the past-data-driven world of analytical thinking and the knowing-without-
reasoning world of intuitive thinking.”
In the light of abduction, this research does not start (nor end) with a
hypothesis. For this reason, this research does not aim to confirm a hypothesis;
nor, authors do not aim to reach to a hypothesis. Apart from these, authors
obtain abductive reasoning to find “What it might be?”, rather than “True or
False”. As abductive reasoning does not declare a conclusion to be true or
false, it posits the potential true (Martin, 2009). According to the outline of
thesis, there is a ‘discussion’ given in place at the end of the theoretical
analysis, where authors indicate the possible true with their personal
understanding. Hence, this thesis consists of a research question, and authors
aim to answer the research question throughout the theoretical analysis of
given empirical data.
2.3 Research Method
As Dunn et al. (2015) indicates, secondary data consists of longitudinal data
with large sample sizes, which commonly increases findings’ generalizability.
For this reason, secondary data provide authors to access large amounts of data
to validate certain theories during the research. Hence, this study mainly
utilizes the relevant secondary data about the subject.
12(82)Obtaining secondary data as a research method is an asset for this study in
terms of benefiting from past researchers who worked on the similar topic.
Dunn et al. (2015) mention that strength of secondary data comes from
variables and relationship among them; which may have not been analyzed
before can be interpreted and may lead to significant results as an enhancement
of previous research(-es).
Borders of the research sample are drawn by the authors as European football,
so circumstances will be considered under European football settings.
Drawing the borders of the research scope improves our understanding, which
is substantial when choosing useful variables for the analysis and results
interpretation (Goode et al., 2016).
Moreover, as secondary data will be used, this can also shed a light for future
researchers. In other words, using secondary data is an important opportunity
to determine certain errors and missing data from previous research (Goode et
al., 2016).
Consequently, this paper also aims to reveal missing aspects under the football
entrepreneurship context, so these gaps can be filled by future researches. In
results, quantitative and qualitative data are given as mentioned previously.
Despite of having two varieties of data, they are collected from various
sources, which make them “Secondary Data”. Therefore, secondary data
constitutes the sole research method of this thesis; and, defined deeply for this
reason.
2.4 Data Collection
For our research, it is necessary to collect multiple secondary data, such as
transfer expense/income, from multiple football teams. Goode et al. (2016)
underlines that having access to large sample sizes is considered as an
advantage when analyzing the results; which gets considerable when
13(82)reviewing results. As it is referred, this study offers a wide variety of secondary
data to validate the conclusion of the study.
The secondary data searching for this research has defined in the table down
below:
Search Engine Keywords Hits
Google AFC Ajax 15,800,000
AFC Ajax youth 899,000
academy interview
AFC Ajax youth 821,000
academy
AFC Ajax annual 731,000
report
Borussia Dortmund 98,100,000
Borussia Dortmund 29,400,000
interview
Borussia Dortmund 1,380,000
scouting system
Borussia Dortmund 654,000
annual report
Sorting: Relevance
Time period: 2010-2020 (Outdated data are excluded)
Figure 2: Secondary data collection
14(82)On the other hand, authors have benefited from various literatures, and
reviewed them to define specific theories. Thus, the table down below
describes the literature search process:
Database Keywords Filters Hits
OneSearch Sports Articles, 1590
entrepreneurship Peer-reviewed,
English,
Entrepreneurship
Football Articles, 79
entrepreneurship Peer-reviewed,
English,
Management,
Entrepreneurship
Five Articles, 38981
forces Peer-reviewed,
framework English,
Management,
Business
Human capital Articles, 5491
Peer-reviewed,
English,
Management,
Business,
Entrepreneurship
Time period: 2010-2020 (Outdated data are excluded)
Figure 3: Literature collection from library databases
15(82)2.5 Data Analysis
2.5.1 Secondary Analysis
Secondary analysis should be considered a serious approach to collect new
data (Bryman, 2012, p. 312). There are some advantages for using secondary
data for authors, that are cost and time, high quality data, opportunity for
longitudinal analysis, opportunity for cross-cultural analysis, more time for
data analysis and the wider obligations of the social researcher (Bryman,
2012). As Davis-Kean et al (2015) stated, secondary data analysis is consistent
on obtained data from other researchers and/or organizations; hence, the
subject (or “users”) are not participated in the study.
In secondary data, official statistics provided by football teams, or relevant
associations, are used. According to Bryman (2012, p. 320) “The use and
analysis of official statistics for purposes of social research has been a very
controversial area for many years. Agencies of the state, in the course of their
business, are required to keep a running record of their areas activity. When
these records are aggregated, they form the official statistics in an area
activity.”
The key point of using secondary data is the time efficiency, so this research
can be done in a more productive and time efficient way. Dunn et al (2015)
indicates that existing data analysis can be done in a shorter amount of time
and crucial research questions can be responded in the meantime. “Secondary
data analysis typically requires less time and monetary resources to conduct
as data sets are often obtained at minimal or no cost, data are readily
available and therefore take less research staff time, and there is no need to
provide incentives to study participants.” (Dunn et al., 2015, pg. 1297).
As the advantages of secondary data analysis indicated above, authors believe
that this approach is the most suitable. These days, top tier football teams in
Europe are unreachable and it is necessary to collect data from them. Thus,
16(82)secondary data collection and analysis are chosen to use the time in the most
efficient way. Otherwise, this research will be incomplete while waiting for
these clubs’ responses.
2.5.2 Case Study
In this research, two types (shaped by authors) of football teams are chosen;
one uses its scouting system and one recruit its own players. Authors chose
Borussia Dortmund (uses scout system) and Ajax (recruits its own players) as
a suitable match for these two types. Through this case study, we aimed a
comparative analysis of these two clubs to address the objectives of this study.
Bryman (2012, pg. 110) defines ‘case’ as an “emphasis tends to be upon an
intensive examination of the setting”, which centers around a society or
organization. According to the references, a case study is a research that
studies a setting of a community and interprets its tendency.
Yin (2009) indicates five types of case: Critical, Extreme (Unique),
Representative (Typical), Revelatory, and Longitudinal. Representative case
suits the best among five types for our research; as it exemplifies a wide class
of which it belongs to (Bryman, 2012). The purpose in this type of case study
is to obtain key circumstances of a routine time period or a common area (Yin,
2009).
This thesis exemplifies AFC Ajax and Borussia Dortmund in two different
aspects of football teams: scouting and facilitation. Borussia Dortmund is
chosen as a representative of “facilitation”, whilst AFC Ajax is chosen for
“scouting”. Moreover, two sides of representative cases are shaped depending
on what they present. The case study is supported by empirical materials and
these materials are analyzed under certain theories, as the thesis is outlined.
17(82)2.6 Research Credibility
Credibility is an important criterion used for measuring the research quality.
Research credibility is directly proportional with the reliability of data
sources. According to Conrad and Becker (2011), determining the
trustworthiness of a study, regardless from its funding, is the pivotal point of
any credibility problem.
On the other hand, Elliott (2013, p.924) underlines that “the credibility of a
study consists in the trustworthiness of the evidence reported by the study and
the extent to which the evidence actually supports the conclusions that are
drawn from it.” In this sense, evidence must be relevant to the study and
strongly support the conclusions that come out from the study.
Conrad and Becker’s (2011) ten criteria of research credibility (demonstrated
in figure 3) has been an important source for the authors to ensure carrying out
a credible research.
Figure 4: 10 Criteria of Credibility (Elliot, 2013, pg. 922: Conrad and Becker,
2011) (PI: Principal Investigator, CRO: Contract Research Organization)
18(82)2.7 Ethical Considerations
2.7.1 Copyrights
Our responsibility, as authors, is to abide research ethics and pay respect to the
previous researchers. For this reason, copyright is a must that needs to be
underlined in the methodology. As this research is consistent with secondary
data, references and data are owned by different authors; the Harvard
referencing system is used to specify the sources of this study.
Bryman and Bell (2015, pg. 147) defines copyright as “an intellectual property
right that protects the owner of copyright from unauthorized copying.” Most
of the research materials, such as reports, publications and books, are protected
by copyright. (Bryman and Bell, 2015). For this reason, this paper warrants to
not violate any copyrights of research publications by following a reference
system.
2.7.2 Data Management
Collecting mass data for a research may raise questions about its management.
These questions regard the way of using data, or the way it's going to fit within
the context. “They raise questions about the extent to which information can
legitimately be used for research purposes that may be different from the
original reason for collecting data.” (Bryman and Bell, 2015, pg.146) As it is
referred, data management concerns the use of data in a legitimate way to
match with research purposes.
The thesis aims to contribute to the entrepreneurship subject specified under
the football industry. As Bryman and Bell (2015, pg. 146) indicates “...it is
increasingly common for researchers to be encouraged to make their data
available to the wider scientific community to that maximum potential benefit
19(82)may be gained from.” We hereby serve future researchers, who will go further
within the same subject.
2.8 Summary
Research Mixed strategy has been followed by authors.
Strategy
Research Abductive approach is chosen.
Design
Research Secondary data is the main research method.
Method
Data Secondary data analysis and representative case study are two
Analysis analyzing approaches.
Research Ten criterions (mentioned previously) are followed
Credibility throughout the research to assure the quality and validity.
Research Copyrights, and data management guidelines are followed.
Ethics
Figure 5: Summary of Methodology
20(82)Theoretical Framework
In this section, authors define chosen theories and indicate their relationship
with the research. These theories will also help on the interpretation of
analysis, also the creation of conclusion. “Business Model”,” Sport
Entrepreneurship”, “Porter’s Five Forces Framework” and “Human
Capital” are the chosen frameworks for the research.
3.1 Business Model
According to Osterwalder and Pigneur (2010, p.14) “A business model
describes the rationale of how an organization creates, delivers, and captures
value.”. The starting point of a business model is a concept that simplifies
explanation and discussion (Osterwalder and Pigneur, 2010). In addition, the
business model helps to define the organization and to identify other
organizations and competitors (Osterwalder and Pigneur, 2010). In addition,
Osterwalder and Pigneur (2010) describe the business model as a language
that helps create and change strategic alternatives for organizations. This
theory examines the business models that football teams can apply when they
create a new business approach after new regulations and developments in the
football industry.
The sport industry is developing day by day, and clubs need to build new
models in the face of this growth. “European Football has significantly
changed especially over the last 20 years, following an intense process of
trading and marketing, a process that has brought important sums of money”
(Dima, 2015, p.1245). The sport industry has become an important economic
industry, and the commercialization of sports required the professionalization
of football teams (Söderman, 2013). According to Söderman (2013, p.7)
football teams do not only provide a service, but they also provide
interconnected “value capture”. This value capture includes teams, sport
21(82)competitions, players, football services, merchandise, and commercial
activities. New stadiums, broadcasting networks, efficiency of players and
transferring popular players and many factors make football an attractive
industry and a business (Şener and Karapolatgil, 2015, p.15).
Football teams' success makes football teams earn high income. “Logo et al.
(2004) propose a theoretical model of the relationship of the key dimensions
of football clubs’ performance” (Galariotis, Germain and Zopounidis, 2017, p.
591). In addition, revenues generated by sports performance affect the
financial performance and this creates a cycle between each other, as well as
– broadcast revenues, ticket prices and merchandising (Galariotis, Germain
and Zopounidis, 2017).
UEFA approved the ‘Financial Fair Play’ regulation in 2010 and, according to
this regulation, all clubs needed to balance their financial situation (Dima,
2015). After this regulation, all football teams went towards restructuring and
created a new business plan. Football teams had to earn high revenues with
success and create a good squad for this. In addition, football teams aim to
create value by using their assets (youth academy, scouting system, facilities)
efficiently with the business model. Osterwalder and Pigneur (2010, p.15) state
that the business model is like the outline of a strategy to be implemented with
organizational structures, processes, and systems. Today, young academies
have become an important resource for football teams and have become an
important tool to strengthen the economy in the long-term (Söderman, 2013).
Additionally, football teams tend to design such a business model to achieve a
good long-term financial position and not to struggle with financial problems
in the future. Competition in professional sports makes the business model
necessary, and the role of managers increases (Brady, Bolchover and Sturgess,
2008 p.60).
22(82)According to Osterwalder and Pigneur (2010), a business model consists of
nine blocks, which are:
Customer segments:
Customers are the most essential component of a business model that allows a
company to continue its activities by profiting (Osterwalder and Pigneur,
2010). According to Osterwalder and Pigneur, (2010, p.20) organizations must
decide which segments to serve and design a business model to meet the needs
of their customers.
Football players become products for football teams, who also contribute to
revenues of a club. The player market movement of a player with a valid
contract between two sports organizations is called transfer (Andras and
Havran, 2015, p.67). The success and failure of clubs differ according to the
capacity of a club and a strong squad is crucial to be successful (Dolles and
Söderman, 2013). Football teams also create a potential customer within
themselves. According to Dolles and Söderman (2013), each football team is
a potential customer of another as they are interdependent to be able to transfer
the players that they need to improve their quality.
On the other hand, business plan designed for diversified customers serves two
unrelated customer segments with different needs and problems (Osterwalder
and Pigneur, 2010, p.21). In the football industry, supporters are one of the
most important components for clubs. “Football without fans with a shared
emotional investment in their team’s performance, and an emotional
investment in the failure of their competitors, doesn’t work – neither as a
human experience nor as a commercial venture” (Hamil, 1999; Ozawa, Cross
and Henderson, 2004 cited in Dolles and Söderman, 2013, p.18).
23(82) Value propositions:
According to Osterwalder and Pigneur (2010, p.22), value propositions are
about solving a customer problem or satisfying a customer's needs. Value
proposition consists of a product or services to the requirements of specific
customer segments (Osterwalder and Pigneur, 2010, p.22). The value
proposition is the section of what are the benefits presented and answers for
what problems are solved.
In the value proposition offered by football clubs, they should choose potential
value of stakeholders and make suggestions that are considered financially
profitable for the club (Vrontis, Thrassou, Kartakoullis and Kriemadis, 2014
p.358). The efficient use of the football club’s resources increases the
efficiency and effectiveness of the club and ensures that its value is captured
(Dolles and Söderman, 2013). As highlighted by Söderman (2013, p.34),
youth academies allow football clubs to recruit new talents, through which
they benefit. Hence, youth academies are strategic for “product development”
(Söderman, 2013). Using their own resources effectively and generating
income are important elements for football clubs. Besides, it is important for
the success of a team that the club invests in youth academy and improves the
performance of junior players.
The aim of football teams is to present players to the professional football
market and recruit players for international championships.
Professionalization of football academies helps teams to release players who
can play at the top level. By keeping players’ performance high and improving
them, football teams can both invest in their own teams and become a resource
for other clubs.
24(82) Channels:
Osterwalder and Pigneur (2010, p.26) state that channels are one of the most
important parts of the business plan because they provide the connection
between the company and customer. In addition, channels are a tool for
companies to advertise their services and allow customers to evaluate the
company’s value proposition (Osterwalder and Pigneur, 2010, p.26). Football
tournaments, that are followed by millions of people, are the platform that
clubs and players demonstrate themselves.
National leagues, international tournaments such as - UEFA Champions
League, European Cup, and FIFA World Cup, are the major football
organizations that are broadcasted on TV and followed by millions, even
billions, of people. These organizations are great opportunities for the players
to prove themselves and being noticed by other potential buyers.
Customer Relationships:
In customer relations, the company must determine how they will
communicate with their customer (Osterwalder and Pigneur, 2010, p.28). In
addition, according to customer relations options, it can drive to motivations
such as customer acquisition, customer retention and boosting sales.
Companies must be progressive service sellers to compete with other offers
(Bauer, Sauer and Schmitt, 2005). Furthermore, the company needs to
establish good personal management activities with their stakeholders. Social
media has become a platform for consumers to communicate with the
companies (Kuzma, Bell and Logue, 2014).
In today’s football industry, social media is the most important communication
platform for the clubs to interact with supporters, as they are a significant
source of income for the club. (Koenigstorfer, Groeppel-Klein and Schmitt,
2010, p.649). The fan base of football teams has also grown rapidly in the last
25(82)decade with the growth of the football industry (Koenigstorfer, Groeppel-
Klein and Schmitt, 2010). Accordingly, football teams want to communicate
more with their fans and therefore they use various social media platforms. In
addition, social media has provided a two-way relationship with fans for
football clubs and gives an opportunity for teams to publish information and
exclusive offers from their social media accounts (Kuzma, Bell and Logue,
2014).
Revenue Streams
Revenue stream is a section of how much income will be earned from the target
audience and the value proposal presented (Osterwalder and Pigneur, 2010).
It is a determination of the revenues that the service company will receive from
its customer. Today, football clubs generate a large part of their income from
transfer revenue, merchandising, sponsorship, and broadcasting rights (Andras
and Havran, 2015). In the business model, the revenue stream is shaped
determined according to the customer segment and the value proposition.
Football clubs interact with each other as talent demanders and talent providers
(Andreff, 2006). Football clubs invest in their players, and after the player
develops, they sell and earn income. Teams focused especially on raising
players earn substantial income from player sales. For example, French
football became the European supplier for professional football players and
contributed to the financial situation of the teams (Andreff, 2006, p.692).
Another revenue stream for football clubs is merchandising. Merchandising
has been a club practice since the football industry has interacted with the
business (Andreff, 2006). Over the years, merchandising has become an
important source of income for football clubs, and fans' interest in team
products has increased this revenue. For example, Manchester United has
established many selling points to sell its products to their fans in Asia. (Ratten
and Ratten, 2011). The success of a team increases the sales of licensed
26(82)products, the talented players and the trophies are the factors that affect the
fans.
Sponsorship is another important source of income in football. According to
Dolles and Söderman, (2013, p.22) sponsorship can be a strategic tool to shape
and promote the image of the football market for clubs and sponsors.
Sponsorship makes a positive agreement between both parties, football teams
earn an additional income through sponsoring companies and also sponsors
can make their own advertisements in the sport industry through football
teams.
Football clubs have become brands due to the increase in the football industry
and these factors have a positive effect on the income channels (Şener and
Karapolatgil, 2015). The success of football clubs directly affects their
revenues, and this is reflected in broadcast and stadium (ticket prices)
revenues.
Key Resources
According to Osterwalder and Pigneur, (2010, p.34) key resources “allow an
enterprise to create and offer a Value Proposition, reach markets, maintain
relationships with Customer Segments, and earn revenues.” (Osterwalder and
Pigneur, 2010, p.34). Determined by the business model, key resources are
required, which can be physical, financial, or human (Osterwalder and
Pigneur, 2010). There is a resource in the football industry depending on
human capital, the key resources of football teams are football players, coaches
and scouts.
“One can discuss game ideas and styles of play forever, but it’s imperative for
a football team to have good players individually, too.” (Söderman, 2013,
p.74). The first target of football teams is to create a good player and then to
create a good team. The main sources of football teams are their players.
Moreover, discovering players and present them to the football market helps
27(82)teams to be more successful and increase their popularity (Radaelli et al.,
2017).
Coaches are another resource for football teams. They play an important role
in the processing and development of the most important key resource
(players) for a football team. The main source of football teams are football
players, but their coaches develop and professionalize them. Every year,
inexperienced and young players join football teams’ youth academy, and
coaches contribute to the tactical and technical development of these players
(Di Minin et al., 2014).
After FFP rule, many football teams drew two way. Firstly, investing in youth
academies and recruit players, and secondly discovering new talents.
According to Radaelli et al., (2017, p.71) football organizations invest millions
of euros to discover talented football players before their competitors.
Scouting system which also relieves football teams economically.
Key Activities
According to Osterwalder and Pigneur (2010, p.36), key activities “...are the
most important actions a company must take to operate successfully.”. In
addition, key activities are important to generate and present a value
proposition, to bring revenue to the market and to maintain customer
relationships (Osterwalder and Pigneur, 2010). Key activities have also an
important place for football clubs because they are the activities required for
football clubs to create value. Investing in the young academy and improving
the players is one of the main key activities of the clubs.
After the UEFA FFP regulation, the introduction of financial constraints on
football clubs and the increase in the debt level of the clubs led European
football clubs to the scouting model (Di Minin, 2014, p.333). Many football
clubs returned to their own resources and attach importance to invest in their
28(82)own facilities to recruit players. Youth academies are very important for the
future of football teams and their financial situation. Dolles and Schweizer
(2010, cited in Dolles and Söderman, 2013, p.12) summarized the benefits of
youth academies as follows “ (1) To identify and develop players for the first
team squad and to train them to make professional football their first career;
(2) to develop players in order to save the club expenditure otherwise spent on
transfer fees; (3) to develop players who can earn the club revenue through
transfer fees; (4) to prepare players also to make a career outside football; (5)
to offer all players of all youth ages and nationalities an opportunity to
experience the best development programme possible.”
Key Partnerships
Companies get into a partnership with other companies to create
resources and reduce risk with the agreement (Osterwalder and Pigneur, 2010,
p.38). In addition, companies are looking for a partner who can reach the same
target group as the institutions and provide financial resources. Football clubs
need partners to be more successful. Financial support and investment make
football clubs economically stronger.
Shareholders are the one that gives the most economic support to football.
Football clubs should ensure financial sustainability and success. Teams need
investments for squad building, transferring, and attracting players, and
keeping good players by high salary wages (Michie and Oughton, 2005).
Except for the income of football teams, it can be provided to invest in the club
with additional revenues and to provide economic comfort for the club.
Cost Structure
According to Osterwalder and Pigneur (2010, p.40) cost structure is “Creating
and delivering value, maintaining Customer Relationship and generating
revenue all incur costs.”. These are the costs that occur when creating a value
proposition in a business model.
29(82)In the football industry, football teams train junior players, and their high-level
coaches constitute an important cost for the teams to create opportunities for
players' recruitment (pool, gym, physiotherapy, sports psychology). Club
opportunities should be very good for a football player to recruit in the best
way. Many clubs are investing heavily in youth academy facilities; such as
football fields for players, whose maintenance create an expense for clubs.
3.2 Sport Entrepreneurship
According to Shane and Venkataraman (2000), entrepreneurship is the process
of recognition with opportunities and different perspectives. Opportunities are
created by people; opportunities and markets are invented, produced and built
accordingly by entrepreneurs (Sarasvathy, 2008). In addition, Løwe Nielsen,
Klyver, Evald and Bager (2017, p.3) state that “Entrepreneurship is a complex
phenomenon that occurs in many different contexts, and varies in terms of its
scope, process and output.”. Entrepreneurship can be analyzed in many ways
because entrepreneurship exists in many different disciplines and the effects
are different (Løwe Nielsen, Klyver, Evald and Bager, 2017).
One of the business areas that entrepreneurship exists is the sport industry.
Ciletti and Chadwick (2012) state that sport is a dynamic and unique industry
that is entrepreneurial by nature. Accordingly, sport entrepreneurship includes
a wide variety of categories of entrepreneurship such as community-based and
corporate entrepreneurship (Ciletti and Chadwick, 2012). Sport
entrepreneurship involves all kinds of innovative, opportunity-driven and
vision-oriented sports activities, and sports entrepreneurship can exist in
different contexts, including the individual, organization and team (Ratten and
Ratten, 2011, p.616).
According to Ratten and Ratten (2011, p.616), “Sports players, agents and
team owners can be entrepreneurial when they are involved in a novel risk
taking activity that is different to what has been done before.”. All
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