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).

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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

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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

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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

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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).

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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).

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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.

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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)

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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)

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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

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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.

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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.

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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

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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

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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

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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,

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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.

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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)

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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

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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

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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

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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).

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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).

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 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.

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 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

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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

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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

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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

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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.

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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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stakeholders in the sports industry (organizations, employees who contribute to the economy, consumers, competitors, etc.) contribute to this entrepreneurship. For example, big football clubs like Manchester United allocate more budget to spend on research and development, which this affects their ability to spend more money on risk-taking and innovation (Ratten, 2019).

3.3 Porter’s Five Forces Framework

Porter’s five forces framework help determine the attractiveness of the industry's competitiveness; these are the threat of entry, the threat of substitutes, the power of buyers, the power of suppliers and the extent of rivalry between competitors (Johnson, Scholes and Whittington, 2011, p.54). In addition, according to Porter's framework, it is not suitable to compete in the industries where these five powers are high, because there will be a lot of competition and pressure to make profit (Johnson, Scholes and Whittington, 2011). Also, five forces framework are related to organizations, a useful starting point for making a strategic analysis for the market. This theory examines how a football team analyzes potential competitor teams while creating a business model and how they should plan according to these analyses.

Strategic analysis is also required in the sports industry where large organizations take place. “Sport managers need to be strategic thinkers because these factors are constantly interacting and changing.” (Beech and Chadwick, 2004, p.222). Organizations, teams, and managers in the sport industry can develop their own models by strategic analysis or anticipate threats in advance and act accordingly. The predictability of teams' plans is crucial for their sportively and economic success. Considering external factors, taking precautions and creating a model in the football industry may be in the teams' benefit. “To analyse sector competitiveness, Porter’s five

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forces model was used, comprising the five forces that determine the attractiveness of the sector. A notable eccentricity of the football sector in this context though, is the fact that “success” is determined by factors beyond business parameters, and primarily athletic achievement ones.” (Rossi, Thrassou and Vrontis, 2013, p.550).

The threat of new entrants

The fact that it is easy to enter the sector affects the degree of competition: if the entry threat is high, it creates difficulties for those in the industry (Johson, Scholes and Whittington, 2011, p.55). In order to reduce the threat of new competitors in an industry, entry barriers should be high because if it is easy for competitors to enter the market, it may pose a threat in the future and weaken the position of existing ones (Johnson, Scholes and Whittington, 2013). According to Beech and Chadwick (2004, p.223), new participants are inevitable and potentially dangerous in a rapidly growing and dynamic industry.

New entrants in the football industry can pose a great threat to other teams. The new owners of the teams enter the market with a large budget and ensure that these teams pose a threat to other teams. For example, increasing market revenues in European football became the target of foreign investors, and one of them, Roman Abramovich, became the owner of Chelsea F.C. in 2003 (Birkhäuser, Kaserer and Urban, 2017). In addition, in the same period, the financial conditions of the European professional club deteriorated, and there was a high increase in player salaries.

Buyer power

“Buyers are the organisation’s immediate customers, not necessarily the ultimate consumers. If buyers are powerful, then they can demand cheap prices or product or service improvements liable to reduce profits.” (Johnson, Scholes and Whittington, 2011, p.58). Buyers power reduces or increases the

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profit of suppliers. If the power of the buyer is low, the customers have the minimum option and service, and purchasing can meet certain needs, while if the buyer’s power is high, customers have a wide choice and they have the right to choose from services that will meet their needs (Beech and Chadwick, 2004).

The most productive teams in the football industry are profitable. There are low number of teams in Europe with the ability of developing football players; thus, this ability can help these teams to gain an advantage, when selling their players.

Supplier power

“Suppliers are those who supply the organisation with what it needs to produce the product or service. As well as fuel, raw materials and equipment, this can include labour and sources of finance.” (Johnson, Scholes and Whittington, 2011, p.58). The strength of suppliers is determined by how easily suppliers can change prices. According to unique products and services they provide, it affects the power of suppliers positively.

According to Beech and Chadwick (2004, p.224), “Suppliers are those businesses that supply the sport organisation with the resources it needs to operate.”. Football teams with quality youth academies play a role of suppliers in the football market. By using the main resources of football teams to be determining and developing potential players, they get an edge over the teams. For example, the Italian football team Udinese Calcio is one of the best in raising and finding players and it provides players to other football clubs and this club is defined as “Europe’s biggest talent factory” (Di Minin et al., 2014, p.331).

The threat of substitution

“Substitutes are products or services that offer a similar benefit to an industry’s products or services, but by a different process.” (Johnson, Scholes

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and Whittington, 2011, p.57). A cheap and easy service can create a supplier change, which can undermine companies’ position and decrease their profits. Customers can switch to alternative products and it can also set a limit on prices that can be acquired in an industry (Johnson, Scholes and Whittington, 2013).

“If customers can switch easily from one organisation to another to gain benefit, the threat of substitution (and, therefore, buyer power) can be said to be high.” (Beech and Chadwick, 2004, p.224). Transfer is very common in the football industry; many teams satisfy a need from other teams. On the other hand, many teams fulfil the need of a new player with their own players by investing in youth academies and scouting.

The level of competitive rivalry

“These wider competitive forces all impinge on the direct competitive rivalry between an organisation and its most immediate rivals.” (Johnson, Scholes and Whittington, 2011, p.59). In this category, the number and strength of competitors is important. Factors such as the size and growth of the market, the number of competitors and their perspective market share, levels of fixed costs and barriers to exit affect competition (Beech and Chadwick, 2004, p.225).

All football teams become a threat to each other. The football industry is growing more and more, so teams are competing hard to become champions and contribute to their income. Football teams invest in being the best in the season and to overtake their rivals and develop strategies accordingly.

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3.4 Human Capital

“Human capital theory posits that individuals with more or higher quality human capital achieve higher performance in executing relevant tasks such as the pre- and post-investment activities of the venture capital process.” (Dimov and Shepherd, 2005, p.2). Human capital represents individuals’ contribution to organizations, they contribute to companies through knowledge, skills, education, and personal experience (Dimov and Shepherd, 2005). Moreover, human capital can increase productivity through investment in human resources, and the costs of this investment are provided for future use (Pasban and Nojedeh, 2016). Human resources can create strategic plans and define goals to motivate and train their employees according to these plans (Armstrong, 2008 cited in Pasban and Nojedeh, 2016, p.251).

The entrepreneurial vision for football organizations is the discovering and deployment of new players (Radaelli et al., 2017). Human capital for football organizations includes the discovery and deployment of new players (Radaelli et al., 2017, p.72). Furthermore, the discovery and recruitment of talent players represent teams getting a sporty and better market niche (Radaelli et al., 2017). Organizations can employ more qualified staff to gain competitive advantage and outpoint their competition. The skills of employees such as good performance and creativity provide a competitive advantage in the organization (Armstrong, 2008, cited in Pasban and Nojedeh, 2016, p.252). Players, which are an important human capital for their teams, have a strategic value for teams and design teams with the “best” players in sport organizations (Radaelli et al., 2017). Therefore, teams that invest in football players take risks and wait for the recruitment of the players and their contribution to the team.

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3.5 Summary

Business Model After the FFP regulations, the initiatives that football teams will make with the business model ensure their sportive and financial success. The business model that football teams can apply for new entrepreneurial ventures is examined. Sport Entrepreneurship The relationship between football industry and sports entrepreneurship is examined. Porter’s Five Forces Framework The effects and analyses of potential competitors of football teams on each other and the kind of framework that should be used while creating a business model are examined. Human Capital The values and effects created by the players, who are the equity of teams, for football teams are examined. Figure 6: Summary of Theoretical Framework

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Results

The chapter defines the collected secondary data under three headlines. Headlines are created depending on what secondary data represents. In the “Borussia Dortmund” and “AFC Ajax” sections, there is a subheading called “Secondary Interviews”; which represents the secondary qualitative data. Hence, rest of data represent secondary quantitative data.

4.1 Borussia Dortmund

Borussia Dortmund is a German professional football club founded in 1909, located in Dortmund, with adopting black and yellow colors. Nowadays, the team is 110 years old, and currently competes in the German top football division, Bundesliga. (KGaA, B., 2020) In its 110 years of history, the club has won various trophies. These trophies are (Statista, 2019):

 8x Bundesliga Champion  5x German Super Cup  4x German Cup  1x UEFA Champions League  1x UEFA Cup Winner’s Cup

4.1.1 Shareholder Structure

Since Borussia Dortmund went public, the club has shareholders and free float shares, like any other open joint stock company. The number of shares owned by each shareholder constitutes the shareholder structure. (Figure 7) Each shareholder has a voice on this club’s (or company’s) management. For this reason, these shareholders take managerial decisions by informing one another.

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Figure 7: Shareholder Structure (Knipping M. and Stahlschmidt M., 2019) In the ‘Shareholder structure’ pie chart (Figure 7), there is a heterogeneous structure that consists of six shareholders with a close number of shares to each other. “Evonik Industries” and “Bernd Geske” spark out with 9.83% and 9.35%. On the other hand, “Ballspieleverein Borussia 09 e.V. Dortmund” holds only 5.53% of shares, which represents the club itself. According to the “Figure 7”, the club has an equal voice on the club’s management with other stakeholders, as their share are close to each other.

However, free float shares are remarkably the most of all by 59.86% and exceeds sum of all shareholder’s percentage. These shares are not owned by anyone and open to public, so everyone (or any corporate) can buy and become one of the shareholders of Borussia Dortmund.

4.1.2 Revenue Structure

Borussia Dortmund has six revenue streams: transfer deals, miscellaneous, merchandising, TV marketing, advertising, match operations. (Figure 8) Income from these channels can contribute to strengthen the scout system.

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Hence, Borussia Dortmund can fund itself to discover hidden talents in worldwide.

There are three major channels occupying most revenues: TV Marketing, transfer deals, and advertising. TV marketing has the biggest portion by 34.19%, which is followed by transfer deals with 24.55%; and advertising takes the third place with 19.78%.

Figure 8: Revenue percentage for 2018-19 (Knipping M. and Stahlschmidt M., 2019) Transfer deals form most of the revenue in both seasons (2018/2019 and 2017/18). In the Figure 9, revenues are given with their numbers and there is a comparison between two seasons. In the 2017/2018 season, transfer deals were the most among all by 222,733 million € and TV marketing followed it

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by 122,293 million €. However, in the next season, TV marketing jumped to the first place by 167,349 million €; so, transfer deals were second by 120,204 million €.

Figure 9: Revenue in Euro (x1000) (Knipping M. and Stahlschmidt M., 2019)

4.1.3 Transfer Data

Borussia Dortmund achieved its highest transfer revenues on 2017/18 season by exceeding 200 million €. (Figure 10) Besides, the biggest gap between transfer revenues and expenses also occurred in 2017/18 season. The gap stands for the profit when expenses are subtracted from revenues, so the biggest profit has been made at the same season.

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Correspondingly, 2014/15 season is the calmest transfer season among five seasons. In other words, transfer revenues and expenses are the lowest of five seasons; so, the profit was the lowest as well.

Figure 10: Last 5-year Transfer Report (Knipping M. and Stahlschmidt M., 2019) In the “Figure 11”, eleven most profitable transfers of the Borussia Dortmund are given. Ousmane Dembele holds the record on departure by 125 million € to FC Barcelona. From Dembele’s transfer deal, Borussia Dortmund’s net margin is 110 million €, which is estimated by extracting the arrival fee from the departure. In other words, sealing the transfer of Ousmane Dembele cost 15 million €.

Figure 11: Eleven most profitable transfers (Transfermarkt.com, 2020)

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Christian Pulisic takes the second place after Dembele, as he has the second highest profit margin by 64 million €. The player has joined from the U19 (Under-19) team of Borussia Dortmund, so there are no expenses on this transfer case. Chelsea paid 64 million € for Pulisic in 2018/19 season, so the player made his way to the EPL.

On the other hand, every player in the “Figure 11” have transferred to the top tier leagues of Europe. For instance, Pierre-Emerick Aubameyang, Henrikh Mkhitaryan and Ilkay Gundogan’s next destination the Premier League like Christian Pulisic. These deals have contributed to the club’s profit; therefore, the total net margin from the transfer campaign to the top tier English clubs was 150.75 million €.

4.1.4 Social Media

Figure 12: Social media (own implications from club’s social media pages) Borussia Dortmund is presented on four major social media channels of Instagram, Twitter, Facebook, and YouTube. There are two Instagram pages of Borussia Dortmund called “@bvb09” and “@blackyellow”; they are followed by 10,400,000 and 374,000 people. The club is represented with two accounts on Twitter as well, which are displayed as “@BVB” and “@BlackYellow”. On Twitter, Borussia Dortmund has 3,897,000 followers in total: 3,500,000 followers for “@BVB” and 397,000 for “@BlackYellow”. The club’s Facebook page can be found as “@BVB” by typing into the search

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box and has 15,000,000 likes. On the other hand, there are 601,000 subscribers on Youtube.

The result after interpreting the social media followers of each channel, Facebook is the strongest social media channel of the club. This means the club can access 15,000,000 people at the same time when they post content to their page. Instagram is the runner up by 10,774,000 followers in total of its two Instagram pages.

4.1.5 Secondary Interviews

"Our ambition is to compete for the Bundesliga and regularly make the latter stages of the Champions League. If you look at the big boys we're up against -- Bayern, the top teams in England and Spain, Paris Saint-Germain -- they each start the season roughly a quarter of a billion Euros ahead of us"

-Michael Zorc, sports director of Borussia Dortmund (Honigstein, 2019)

Borussia Dortmund does not give up on their goals for Bundesliga title and the Champions League qualification, as Michael Zorc says above. In fact, there are “big boys”, who begin every season with approximately 250 million € ahead of Borussia Dortmund. “Big boys” stand for the clubs wallowing in wealth. As it is referred above, Borussia Dortmund remains ambitious for its goals, and takes necessary actions, despite of the “big boys”.

“I think they saw a lot of what I do now, my attacking mode, or just being a creative player and making a difference in the game”

-Christian Pulisic, former Borussia Dortmund player (Ahmed 2018)

Christian Pulisic defines on how he is discovered, and what sparked on him. In other words, as it is referred, he is discovered because they (Borsussia

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Dortmund) saw what he can do as an attacker. The club saw his abilities on his attacking side, as a creative player and a game-changer.

“We try to find these extraordinary players when they are not at their peak. We develop them and then, at some time, we know that they will go.”

-Michael Zorc, sports director of Borussia Dortmund (Ahmed, 2018)

Michael Zorc summarizes the club’s transfer principle. He states that the club is already aware of scouted player’s possible departure at any time. For this reason, the club discovers them when they are not at their peak potential. Then, their hidden potential arise during their Borussia Dortmund spell, and they are presented to the world football stage.

"It would be naive to think that finances don't have any influence on what happens on the pitch. That's why we like working with young players who are at a level we can afford and generate money that we can use to close the gap somehow."

-Michael Zorc, sports director of Borussia Dortmund (Honigstein, 2019)

Michael Zorc honestly states that their transfer policy is influenced by finances. The club prefers younger players due to this reason; thus, they work with affordable young players and generate money from them. In this way, Borussia Dortmund tries to close the financial gap with richer clubs.

"I know the club and they achieved a lot with young talent and that makes people think that it is a good place. Real Madrid is probably also a great place for a challenge but Dortmund just felt right for me."

-Alexander Isak, former Borussia Dortmund player (Ahmed, 2018)

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The club’s achievements with young players in the past is a good source of reference for newcomer young players, as Alexander Isak states above. Young players rely on these references when they make their decision on moving to Borussia Dortmund. Alexander Isak says that Borussia Dortmund felt right for him, as they achieved a lot with young talents.

“We also explain to the boys who join us -- to Dan-Axel Zagadou from PSG or Jadon Sancho from Manchester City -- the special feeling of the Ruhr area. They understand and there are rarely problems because they're very professional and have a clear vision of their career trajectory. They want to succeed and so do we. Our targets align.”

-Michael Zorc, sports director of Borussia Dortmund (Honigstein, 2019)

Michael Zorc states that Borussia Dortmund and young players -such as Zagadou and Sancho- can understand each other. These two sides can understand each other’s vision and problems in most cases. Players have a vision of career trajectory and they are professionals. Both the club and players want to succeed, hence there is a win-win situation.

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4.2 AFC Ajax

AFC Ajax is a Dutch professional football club founded in 1900, based in Amsterdam, and embraces white-red colors and competes in the highest Dutch football division (aka. Eredivisie). Ajax has fit numerous trophies/titles in its 120 years old history, so their museum is filled out with them. Here are titles won by AFC Ajax:

● 34x Eredivisie Champion ● 19x Dutch Cup ● 9x Dutch Super Cup ● 1x UEFA Cup ● 4x UEFA Champions League ● 1x UEFA Cup Winners Cup ● 2x Intercontinental Cup ● 3x UEFA Supercup

4.2.1 Shareholder Structure

AFC Ajax has various shareholders, as a publicly held company. The various shareholders of the club form the shareholder structure with their portion of shares. (Appendix 8) Unlike Borussia Dortmund, there are no free floats, so the club is the biggest stakeholder itself. Accordingly, the club association (aka. “Vereniging AFC Ajax”) is the major decision maker on the club’s management.

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Figure 13: Shareholder structure (Marketscreener.com. 2020) As previously mentioned, AFC Ajax’s shareholder structure is adversely different from Borussia Dortmund. Additionally, shareholders’ entities are not equal, as well as their impact on the club’s fate. This shareholder structure (Figure 13) visualizes the dominance of “Vereniging AFC Ajax” by 73%. The nine other stakeholders share the 27% of portion among each other.

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4.2.2 Revenue Structure

Figure 14: Sales per Businesses (*=represents values for 2018) (Statista, 2019)

There are five revenue streams of AFC Ajax: Football, Partnerships, Merchandising, Television, Other. (Figure 14) Profit from these revenue streams can contribute to the improvement of youth academy and keep running of club’s system.

“Football” provides the most revenue in both seasons for AFC Ajax. Income generated from football in 2017/18 season is 34.44 million € by constituting 37.5% of all revenue in that season. In the 2018/19 season, the profit made from “Football” is 133.06 million € and 65.7% of revenue is constituted. Other revenues have been close to their previous season amount. Football revenues made a huge increase in one season comparing to other revenue streams.

“Partnerships” is the second major revenue stream after “Football”, then “Merchandising” takes the third place. Unlike “Football”, second and third biggest revenue streams are increased in smaller portions. Therefore,

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“Partnerships” increased from 28.93 million € to 34.35 million €, and “Merchandising” increased from 14.06 million € to 21.22 million €.

4.2.3 Transfer Data

Figure 15: Revenue from departed transfers (Statista, 2019)

AFC Ajax has made revenues from departed transfers above 30 million euro in last three seasons. (Figure 15) Transfer revenue graph illustrated fluctuantly as 2016/17 season’s revenue is around 80 million €, then drops to 40 million € on the next season, and ended up at around 70 million € on 2018/19 season.

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Figure 16: Eleven most profitable transfers (Transfermarkt.com, 2020)

“Figure 16” illustrates AFC Ajax’s eleven most profitable transfers. Matthijs de Ligt takes the first place by 85.50 million € net margin. Frenkie de Jong has the second place by 75 million €. These first two most profitable players are raised from the youth academy.

Six out of eleven players are raised from the club’s youth academy, so there is no fee on their arrival (except for Kasper Dolberg). Besides, AFC Ajax has earned 243 million in total. The most spent amount on a player is only 11 million € for Hakim Ziyech, who is on his way to Chelsea for 40 million € with 29 million € of net margin.

4.2.4 Social Media

Figure 17: Social media (own implications from club’s social media pages)

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The Instagram page of Ajax is called “@afcajax” for its both Dutch and English pages; it has a total of 10,774,000 followers. Then it is followed by the Facebook page, with the same name, by 3,200,000. There are 1,374,800 followers on Twitter and 656,000 subscribers on YouTube.

The numbers given in “Figure 17” represents how many people can the club reach at the same time, when they post a content on social media. For example, approximately 11 million people can interact with a post from the club on Instagram. Another instance, a video can drop on 656,000 people’s timeline on YouTube.

4.2.5 Secondary Interviews

“… Ajax’s youth academy is world famous. The goal of Ajax is to form talented youngsters into top football players. Only the very best will reach the first team after a difficult and often long and tiring road. Ajax has attached great importance to its own world renowned youth development program. In the season 2010/11, the Ajax selection largely consists of home grown players.”

-Edmond Claus, former Ajax Academy Youth Coach, (Graham, 2011)

Edmond Claus states the fame of AFC Ajax’s youth academy, which is worldwide. It is stated that, the club’s goal is centered around the development of youth players. Although, Claus also indicates the difficulty of youth player development; so only exclusively best ones make their way to the first team. Besides, in 2010/11, AFC Ajax’s first team squad was mainly consisted of players from youth academy.

“Marc and I have been players. We have flown the nest at a certain point to find another challenge and we know that is going to happen. That is not a problem as long as they give two, three,

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four good years of service to the club, win the league, play amazing football. Then you can go. Also, for the young players from the academy to have a path to the first team we need to open up spaces. If you have no spaces, then talent underneath is suffocated.”

-Edwin van der Sar, CEO of AFC Ajax (Lawrence, 2019)

Players are aware of a possible departure in the future, as van der Sar stated. Accordingly, players must serve to their home club for 2, 3, or 4 years before they leave. Departing players open new spots in the first team for players from youth academy. As it is underlined, talents may become dulled if they did not get the spot needed.

“Before players are admitted into the youth development program, they must go through a stringent selection process. Ajax coaches and scouts use the ‘TIPS’ system for selection. Technique, Insight, Personality and Speed are the essential qualities that an Ajax (youth) player needs to possess. With the TIPS system, the most talented players become familiar early on with Ajax’s unique football style.”

-Edmond Claus, former Ajax Academy Youth Coach, (Graham, 2011)

Difficulty of selection process to the youth academy has been mentioned by Edmond Claus on above. This selection is so strict for candidate players, so coaches and scouts are looking for four main qualities: Technique, Insight, Personality, Speed. The talented players, who possess these qualities, can become familiar with the club’s particular football style from very beginning.

“At our youth development complex called ‘De Toekomst’ (The Future), we have all facilities available for players to get to the top. Everything, both on and off the field, must be perfectly organised. Not only for Ajax 1, but also for the youth academy

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at ‘De Toekomst’. Only then, top performances can be delivered.”

-Edmond Claus, former Ajax Academy Youth Coach, (Graham, 2011)

AFC Ajax’s youth academy called ‘De Toekomst’ (The Future) has every facility for player’s improvement to the top level. As it is stated by Edmond Claus, everything is organized properly both inside and outside the field. By doing so, top performances can be delivered from the youth academy to the first team.

“We were maybe a bit reluctant to put money into older players and we thought we could solve things with our academy. But going back to our experience, in ’95 we had a very young and talented team with Edgar Davids, Clarence Seedorf, Overmars, Frank and Ronald de Boer, Patrick Kluivert – but we also had Frank Rijkaard and Danny Blind. They had played in World Cups and won Champions Leagues. We reflected a bit on the old success from ’95. We wanted to combine the abundance of young talent with experience.”

-Edwin van der Sar, CEO of AFC Ajax (Lawrence, 2019)

Edwin van der Sar indicates that AFC Ajax was unwilling on spending money on older players, so the club believed that the academy is the sole solution. In the club history, there are many talented well-known players achieved successes in World Cups, as well as Champions League. Hence, the club wants to harmonize young talent with experience.

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4.1 Brand Value of the European Leagues

Figure 18: Brand value of top tier European football leagues in 2019 (Statista,

2019)

English football league has the highest value, among nine other leagues, by 8,684 million €. (Figure 18) The gap between the English league and the rest is so high, even the second and third most valued leagues’ total value can’t exceed it. Second most valued football league belongs to Spain by 3,998 million €, whilst German league is third by 3,815 million €.

In the case of AFC Ajax and Borussia Dortmund, the German league is valued more than ten times of the Dutch league’s value. As it is illustrated, the Dutch league is valued only 169 million €, so AFC Ajax is competing in a less valued league than the German league of Borussia Dortmund.

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Analysis This chapter analyses two case studies as they are representatives of two different approaches. Borussia Dortmund represents clubs that are specialized at scouting, while AFC Ajax represents clubs that are famed with their youth academy. The chapter has separated into two parts by the name of two clubs. Two cases will be analyzed according to four theories; thus, four subheadings under two clubs are named four theories.

5.1 Borussia Dortmund

5.1.1 Business Model

5.1.1.1 Key Partners

Having a rich history of 110 years and fit various sportive successes in this history, it attracts to gather key partners for Borussia Dortmund. On the other hand, the club directory was aware of the necessity of key partners; thus, most of the shares were opened to the public. (Figure 7) As previously mentioned within the “Theoretical Framework”, shareholders are the biggest economic supporter of football. For this reason, shareholders’ contribution as key partners is essential to provide an economic comfort, and to develop a sustainable growth by investing on scouting.

5.1.1.2 Revenue Stream

As illustrated in Figure 8 and 9, Borussia Dortmund’s transfer revenue constitutes a notable portion of the revenue stream. The portion of transfer revenue among other revenues shows that Borussia Dortmund is an active team on transfer. Furthermore, the club is concentrated on player development to make a sale at the right time, which is defined by the huge gaps between transfer revenues and sales on “Figure 9”. Other revenue streams, such as “TV

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marketing”, also contribute to Borussia Dortmund’s finance and to keep its scouting system alive.

5.1.1.3 Key Activities

The club invests in the scouting system to discover the undiscovered talented players. For this reason, the club sends scout around the world, which is considered as the major key activity under the business model framework. For this reason, high incomes obtained from transfers made by scouting. For example, Ousmane Dembele (a French professional footballer) purchased from Stade Rennais F.C. (a French professional football club) for 15M Euros in the 2016/2017 season, was sold to FC Barcelona (a Spanish professional football club) for 125M Euros in the 2017/2018 season. (Figure 11)

5.1.1.4 Key Resources

There are three key resources defined in the “Theoretical Framework”: Players, coaches, and scouts. Players get to the pitch and play their football. Their good run of form, or revealed potential, can make them to move to a bigger club. Coaches are responsible on player development and help them to reach their potential. Scouts are officials who discover undercover talents, or promising players, and incorporates to the Borussia Dortmund.

5.1.1.5 Value proposition

There is a double-sided value proposition. First, a value proposed for the newly arrived players. Borussia Dortmund offers a complete facilitation for newly arrived players, where every need for player development has met. Likewise, Bundesliga -where Borussia Dortmund competes- is the third most popular league of Europe. (Figure 18) Accordingly, the club gives an opportunity to its players to prove themselves in a league, which has many followers (including the scouts of financially rich clubs). Second, a value proposed for

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the financially rich clubs. Borussia Dortmund offers players for these clubs, who reached to his full potential and proved himself in his team appearances on Bundesliga, and/or UEFA Champions League.

5.1.1.6 Customer Relationship

In accordance with the “Theoretical Framework”, social media is the most important platform for clubs to communicate with fans and inform them about promotions (or offers). In the case of Borussia Dortmund, the biggest platform communication with fans is Facebook. (Figure 12) Accordingly, Facebook pledges a huge interaction with most people of all four channels, so the club has an opportunity to build relations and promotions for 15,000,000 subscribers at the same time. (Figure 12)

5.1.1.7 Channels

Borussia Dortmund competes in a 3,815 million € worth league of Bundesliga (Figure 18) and competes in the UEFA Champions League. Additionally, 34.19% of club revenue comes from TV Marketing in 2018-19 season, which proves the strength of the channel between fans and the club. (Figure 8) Secondly, other clubs’ officials (or scouts) are also followers of Borussia Dortmund’s matches to watch certain players. The tournament and the league of Borussia Dortmund offers a popular channel to advertise itself. Therefore, the club offers a great opportunity for its players to prove themselves; thus, these players get the attention of potential buyers.

5.1.1.8 Cost Structure

Club facilities and transfer expenses constitute the cost structure of Borussia Dortmund. Borussia Dortmund’s club facilities are a major part of their player development system. Thence, any necessary element for players’ development (training grounds, gym, coaches, scouts etc.) form a significant cost as “club

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facilities”. Transfer expenses represent the amount of money spent for buying players. As illustrated in the “Figures 10 and 11”, transfer revenue (or profit margin) significantly exceeds transfer expenses (also “fee per player”); hence, it defines how the club works on player improvement and sells at the right time.

5.1.1.9 Customer Segment

Customer segment for Borussia Dortmund are in two groups as “clubs” and “fans”. Clubs are addressed to ones, which never have any monetary problems. Borussia Dortmund considers them as potential buyers of their players and attracts them if players are well-formed. The club attracts fans as well, relatively to its well-form. In other words, fans keep follow the team on/off the field and buy merchandises (jersey, hat, scarf etc.) as it is given in “Figures 8 and 9”.

5.1.2 Sport Entrepreneurship

Transfer policy of Borussia Dortmund is based on scouting, so they seal deals in a very low amount of money. After playing for the club for 1-2 years at least, the club sells these players with profit. However, it is very unclear to estimate the revenue amount from a player. This does not mean that 100 million € profit will be provided from every departure, only because Ousmane Dembele’s departure provided 110 million €. (Figure 11) In other words, there is a risk taken by Borussia Dortmund in terms of the ‘Sport Entrepreneurship’. The profit from each player is varied upon player’s performance on matches and competitions; so, it may me whether in a record or very low amount. The match performance is relevant with player development through training. Therefore, Borussia Dortmund scouting system is considered as an entrepreneurship within football, along with its risks included.

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5.1.3 Porter’s Five Forces Framework

According to the ‘Porter’s Five Forces of Framework’, as it is described in the “Theoretical Framework” chapter, the supplier power is indicated by the change made. Borussia Dortmund’s notable revenue from TV Marketing (Figure 9) is the return of suppliers’ contribution on improving the players. The quality of players is directly proportional with the club’s football, which attracts more people to watch the team from TV and contributes to the TV Marketing revenue.

Threat of entry in Borussia Dortmund’s case can be interpreted from multiple aspects within the ‘Five Forces Framework’ context. First, the competition on scouting a player; secondly, competition in tournaments and the league. These different competitive rivalries are both against other clubs. For this reason, there are other clubs with scouts among Europe to snipe underrated talents. Borussia Dortmund is challenging to eliminate (or minimize) threats of entry and substitution in two fronts: Inside and outside the pitch.

5.1.4 Human Capital

Borussia Dortmund aims the top of Bundesliga and the Champions League by investment and improvement of its own human capital. ‘Human Capital’ theory can be interpreted in two aspects: Player, and the club. Players are considered as the main human capital themselves, and the club is the one enhances the human capital.

From the player’s (or ‘human capital’) perspective, it is attractive to wear the black-yellow jersey by knowing to have a bright future in the aftermath of Borussia Dortmund, as many players make their way to bigger leagues and clubs. After each move to bigger clubs, ensuing players are influenced from these cases; hence, they feel motivated to give their best for Borussia Dortmund.

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In the case of Borussia Dortmund, the club snipes high-potential players with a reasonable price and sells them after they created value on them. It is the club’s responsibility to provide necessities for player development, and to follow players’ progress. In other words, the club must meet demands of value creation of its human capital and make the sale decision once a human capital reached its maximum value.

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5.2 AFC Ajax

5.2.1 Business Model

5.2.1.1 Key Partners

Despite Ajax’s winning four continental and one intercontinental cup within a 120-years-old history, the club is not popular enough due to Eredivisie’s brand value. (Figure 18) In fact, this makes harder for AFC Ajax to find new key partners, such as shareholders, and sponsorships. (Figure 13) Additionally, the club does not have free float shares, and 73% of shares are owned by the club. For this reason, according to the “Figure 13”, other nine shareholders’ economic impact as a key partner is low.

5.2.1.2 Revenue Stream

“Figure 14” illustrates that “Football” constitutes the majority in the revenue, which represents transfer revenues and match operations. On the other hand, transfer revenues are above 40 million € in last three seasons. (Figure 15) The illustration of transfer revenues for last three seasons shows AFC Ajax is an active club on transfer. Besides, the club relies on its players raised from the youth academy. In other words, the club has shaped a new revenue stream from selling of players raised from the youth academy. Accordingly, six out of eleven most profitable players originally came from the youth academy. (Figure 16)

5.2.1.3 Key Activities

The club invests on its academy to raise players for the first team and sell them at the right time. From the first moment to last, a player’s progress has been followed. Selection process goes on from the beginning until the end, so not every player can show a promising improvement and make their way to the first team. The club earns revenue from the ones that make their way to the

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first team and prove themselves. For example, Mathijs de Ligt (Dutch professional player) made his debut at the first team on 2016/17 season, was sold to Juventus (Italian professional football club) for 85 million € in the 2019/20 season. (Figure 16)

5.2.1.4 Key Resources

Players, coaches, and scouts are three key resources for football clubs, as its defined in the “Theoretical Framework”. In the case of AFC Ajax, scouts discover players when they are very young for the youth academy. These young scouted players go through a selection process by coaches in the beginning. Then, selected ones are tracked and trained by coaches throughout the first team. Players must make a notable progress before joining AFC Ajax’s first team. Therefore, these three key resources complete one another. Scouts discover players in the very beginning. Coaches do whatever its necessary for players’ improvement. Lastly, players prove themselves on the pitch whether they are worth to move to a bigger club or not.

5.2.1.5 Value proposition

The double-sided value proposition also applies for AFC Ajax. There are values proposed for both players and bigger clubs. First, the club offers players a fully equipped club facilities for their improvement, from the youth academy to the first team. Players are also offered a completely professionalized training process before they become professional players. Secondly, AFC Ajax offers a value of talented players for bigger clubs, who proved themselves by contributing for club’s success on competitions.

5.2.1.6 Customer Relationship

Social media is the major platform for clubs to keep in touch with their fans and inform them about special offers. In the case of AFC Ajax, the biggest

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communication platform is Instagram. (Figure 17) As it is illustrated, AFC Ajax’s Instagram presence has the biggest interaction capacity among four channels, so the amount of capacity is 10,774,000 followers. (Figure 17)

5.2.1.7 Channels

Despite AFC Ajax competes in Eredivisie, the fourth least popular league, the club participates in the Champions League. (Figure 18) The club’s most important channel is the Champions League, where top tier teams participate among all over the Europe. For this reason, Champions League matches are followed by other clubs’ scouts; so, AFC Ajax can attract them if it plays good football. Therefore, the Champions League is an important channel for AFC Ajax to market its players, as well as an opportunity where players can prove their talents to bigger clubs.

5.2.1.8 Cost Structure

Transfer expenses are one of two expenses in the cost structure of AFC Ajax. However, the other expense of club facilities is at the forefront, comparing to the transfer expenses. Despite this, club facilities (including youth academy) constitute most of the cost structure, as its essential for the player development. As its illustrated in “Figure 16”, the club has spent only 35.57 million € for six players, and other five player did not cost any money. Thus, the club spends so much on its own facilities, rather than transferring players abroad

5.2.1.9 Customer Segment

AFC Ajax’s customer segment is separated into two groups: Clubs, and fans. Clubs hereby addressed to rich, big clubs, that never hesitate on spending money. This kind of clubs are potential buyers of AFC Ajax’s players, if they run a good form and prove their potential. On the other hand, players’ form is

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relevant with attraction of fans. Fans get motivated if the club plays a good and enjoyable football, so they keep follow their team on/off the field.

5.2.2 Sport Entrepreneurship

AFC Ajax has created a system that is centered around player development. Differently from an ordinary club, AFC Ajax discovers players when they are young. These discovered players join to the club youth academy by going through a selection process. The club starts to track their progress since the first day they entered to the youth academy. Not every player can make their way to the first team, so there is some risk portion. In other words, players’ potential and talent are not same among each other. Nevertheless, AFC Ajax profits mostly from its players with youth academy origin. AFC Ajax’s ‘Sport Entrepreneurship’ context is based on player development from youth academy, sell at the right time, and replace the sold ones from youth. Therefore, it continues like a cycle for the club.

5.2.3 Porter’s Five Forces Framework

According to the ‘Porter’s five Forces of Framework’, as it is defined in the “Theoretical Framework”, low shares of other stakeholders come up to the low power of supplier power. The lack of brand awareness for AFC Ajax (depending on Eredivisie’s brand value), would cause a ‘threat of entry’ for the clubs from top 3 most valued leagues of England, Spain, and Germany. (Figure 18) For this reason, AFC Ajax is followed less than clubs from these three leagues; so, its performance is unknown in the Champions League.

Moreover, AFC Ajax has a potential to cause “threat of substitution” for those clubs as well; because its performance in tournaments (such as UEFA Champions League) may attract audiences from elsewhere (or may even steal attraction from other clubs).

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The attractiveness of the club players with high prices are relevant with their good football. In other words, providing enjoyable football to audiences reveals players’ talents, and attributes. This attracts people to follow the club, as well as other club directors. In the scale of people, following frequency is directly proportional with club’s success, which scales the “Supplier Power”.

5.2.4 Human Capital

AFC Ajax sets its goal to be at the top of Eredivisie and the Champions League as predecessors of its icons (Johan Cruyff, Edwin van der Sar etc.). To do so, the club has constructed a player-centric system. In other words, the club’s system is focused on ‘Human Capital’, so players represent the human capital here.

AFC Ajax’s successes in Eredivisie, and being participants of the Champions League, motivates players with the opportunity to play in an international arena. In other words, players are aware of the possibility to move to a bigger club if they perform well in the Champions League. For this reason, players are eager to make progress and benefit from club facilities since they join the club.

On the other hand, the club incorporates talented younglings to its youth academy. The club tracks each of these players’ progress since their first time entering to AFC Ajax. Players, that show promising development, are promoted to the first team. Once a player has promoted to the first team from youth academy, its his responsible to work hard. Meanwhile, the club must provide the circumstances for its players’ development. Therefore, the club sells players when the right time comes, and makes profit as an outcome of ‘Human Capital’ development.

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Discussion

In this part, two representative case studies are summarized, and authors define their own implications from case studies. These implications are given as significance in four different groups.

The summary of two case studies show two different approaches of entrepreneurship through their own human capital. One scouts players and other one raises them through its youth academy. In the end of these two entrepreneurial approaches, these two clubs gain huge profits from their players.

The results demonstrate that two different approaches of value creation out of young talents adopted by AFC Ajax and Borussia Dortmund have various impacts on these clubs and generate different results. In the case of Borussia Dortmund, the club adopted scouting method to discover the hidden gems of football. In other words, they scout unfamed-but-promising players, and present them to the European football arena. There are various cases presented in the analysis, which proves Borussia Dortmund’s scouting capacity. Borussia Dortmund’s entrepreneurial approach is based on scouting, as the club makes a significant transfer profit from each player.

AFC Ajax is another practitioner of entrepreneurship, which prioritize youth academies. AFC Ajax’s transfer policy is based upon its youth academy; so, the club sells players that have been recruited from the youth academy more than scouted ones. The analysis of this club has indicated that the club has not spent on transfers at all. In fact, the club has a successful youth academy, that allowed many young talents to shine. To sum, in both cases clubs can increase their incomes thanks to their entrepreneurial approaches to economic value creation from human capital.

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6.1 Significance of Youth Academies in Value Creation

Youth academies are mainly significant for clubs’ sportive success. Quality of youth academies are directly proportional with the quality of players as an outcome. As examined in the case study, value of youth academies has a positive effect on the recruitment of football players and club success.

Although, youth academies can be considered as an investment for long-term along with its player outcomes. Clubs can even build the backbone of their starting eleven by players from youth academies. These players can whether serve to their clubs for a long term, or make their clubs earn money by being sold to another club.

From the economical perspective, as previously mentioned, young players can be a source of profit depending on their performance. In other words, these players can provide financial stability to their clubs, depending on their progress. For this reason, clubs save money from their transfer budget, and replace gaps in the squad from their own academies. As it is given in the case, AFC Ajax exemplifies an entrepreneurial approach by investing on youth academy, makes profit from players.

6.2 Significance of Scouting and Human Capital

Human capital has been a driven force for success. Thus, its quality is correlated with the possibility of success. In terms of football clubs, scouts and players are part of human capital. These two aspects have a strong bond between each other: Scouts discover players and bring to the club. The quality of scouts is directly related with the quality of discovered players.

Scouting is one of the most important aspect of player investment. Bring undiscovered talents to the transfer market, and profit by them, is a way followed by football clubs. Increasing price of fully developed players, and FFP rules, motivate football clubs to do scouting. Football clubs aim to

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contribute on scouted young players' development, sell them in a reasonable price, and create financial resource.

As it is examined in the Borussia Dortmund case, the club became successful and got financially secured by investing on scouting young players. The risk- taking behavior of football clubs (investing in undiscovered players' development) is an example of entrepreneurship.

6.3 Significance of Club Structure

The presence of a club structure is essential for them, which shapes their managerial reaction towards potential competitors. This reaction can be considered as a strategic decision, that may have whether long- or short-term effects. For this reason, a club’s structure must be supported with a strong business approach.

Entrepreneurial approach towards potential competitors can improve clubs, so creative solutions can be generated in line with this approach. A club can particularly position itself with each action taken relevantly to this approach. For instance, identifying and analyzing competitors before planning, can be beneficial to clubs. In this way, clubs can take their next step depending on its surrounding opportunities and threats.

As it is examined in the case, both clubs do plan in accordance with their strategy. Both clubs became successful and financially stable. For example, AFC Ajax have a strategy of about recruiting their own players from youth academy. Their CEO and former coach state that club structure has shaped according to player recruitment.

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6.4 Significance of Sport Facilities

Sport facilities such as training grounds and gyms are very important for the clubs as they are the places where the players practice. Given the importance of the facilities, a club with developed facilities can positively contribute to a player’s career. Along with training grounds, a player’s development can be completed with experienced coaches and a training program, which is correlated with the “significance of human capital” as well.

For instance, in the case of Borussia Dortmund, the club built its entrepreneurial business model with the significant reliance on human capital and sport facility. As they come up with their scouting ability, the quality of their scouting outcomes is enhanced by their spot facility quality. Thus, a player is recruited via scouting, that player goes through trainings through Borussia Dortmund and ends up with achieving a certain quality.

In the second case of AFC Ajax, the club’s successful youth academy has a well-quality sport facility beyond. Once a youngling enters through the doors of AFC Ajax, the club has much to offer him for his long career journey. Therefore, sport facility is all about how much a club offers for players’ improvement in terms of training opportunities. Thence, the quality of sport facility directly contributes to players’ progress, and these two are directly propotional with each other.

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Conclusion In this chapter, authors hereby to present their conclusion with limitations, and suggestions to future researchers. Conclusion consists of key findings from the research and answers to the research question. Limitations and suggestions are based on the experiences from the research process.

7.1 Key Findings

In the beginning, this thesis elaborates the significance of entrepreneurship for football teams. In terms of significance, factors that drive football teams to be entrepreneurs are introduced. Football has been a rapidly growing sector, thus there is a challenging competition amongst football clubs. Roman Abramovich (the owner of Chelsea FC) is one of the examples of commercialization in of the football industry, along with Manchester City and Paris Saint Germain that are also sold to multi-billionaire businesspeople. Football clubs spend tremendous amount of money to create strong squads and aim to win national football leagues and other organizations such as UEFA Champions League to raise their market value and gain the rewards of these tournaments. The remarkable financial gaps amongst football clubs made UEFA to adopt the FFP regulations in order to curb the financial inequality problem deriving from multi-billionaire football clubs.

Considering the objectives and RQs of this study, two representative case studies of Borussia Dortmund and AFC Ajax reveals different approach of “Footballpreneurship”: scouting and youth academy. AFC Ajax and Borussia Dortmund enrich their squads by following these two approaches. Then, they sell players when the right time has come. The way a player joins these clubs, whether by scouting or youth academy, has a profitable return for the club.

Consequently, when we get back our research questions of “How did the regulations on the football clubs such as FFP affect the business patterns of the European football clubs?” and “How did different entrepreneurial

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approaches impact the clubs structure of AFC Ajax and Borussia Dortmund in the context of value creation?”, they are answered through the certain theories stated in the analysis. Two different perspectives of player discovery and recruitment are given additionally within the analysis. Despite of different approaches, they have similarities in creating economical value from their players. This fact is directly connected with entrepreneurship, as the risk existence is valid for every new ventures. Summing up all these facts prove the existence of entrepreneurship for every football teams, and clubs can become entrepreneurs by creating value from players which is called by Footballpreneurship by the authors of this master thesis.

7.2 Limitations

The authors have encountered several limitations during this research. These limitations affect the working process, as well as the timeline. Hence, facts that have been challenged this research are indicated below:

 Communicating a top football club has been the major limitation to this research. It was challenging to reach the football clubs that have been the subjects to the case study.  The data collection method of this study has been affected as the Covid-19 pandemic made impossible to travel, as well as made difficult to carry out face-to-face interviews.  Most of the football teams keep their secondary data in private, which limit data source options. The research remained in a narrower scope due to this fact.  Despite of having certain theoretical frameworks are chosen, football teams do not have an official framework. For example, the business model canvas has been made by individual implications, so there are none official business model canvases belong to football teams.

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 As the research is obliged to use secondary data, the methodology has been affected. In this sense, the scope of methodology remained narrow, so opportunity of using many methods has unfortunately been dismissed.  Lack of previous research on this subject and literature limited the scope of this study.

7.3 Recommendations for Future Research

The authors hereby to give their suggestions to future researchers, who may follow the similar context. These suggestions came out from authors’ experiences faced under the research process, and are mentioned down below to help researchers:

 Interview with youth academy staffs would level up any possible future research, which may give insight about youth academies’ structure and their contribution on player development. On the other hand, interviews can lead to new research gaps, which may be worthy to go on.  Interviewees should be determined in advance, as well as their alternatives. In the case if primarily planned interviewees are unreachable, alternatives can be tried to contact; thus, alternative interviewees should be as many as possible.  Other teams can take place of Borussia Dortmund and AFC Ajax, so it is possible to gravitate into other clubs.  Football industry has various managerial branches and activities, such as merchandising, to define “Footballpreneurship” from another scope.

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Timetable This section gives the entire timeline of the working process for the thesis. The entire timeline consists of 20 weeks; which is equivalent to one semester.

Figure 19: Timetable

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