Footballpreneurship
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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