Commercial Success in Football and PESTLE Analysis
Commercial success is one of every business’s fundamental goals, especially in the sports industry and more specifically, in a sport as popular and global as football. Success can be defined as the completion of an objective or the achievement of a goal (Do you know this term?) and the word commercial refers to the supply of goods and services (Commercial success definition and meaning). In order to ensure commercial success, a business has to consider various different aspects such as the ones that will be evaluated throughout this essay. These include the environment in which the team operates and its ecosystem, the ownership of the club, its shareholders and stakeholders, and the organizational structure in addition to the revenue streams. Furthermore, it is very important to consider the PESTLE analysis, to understand the impact of political, economic, social, technological, legal, and environmental factors on the organization. The football club that will be taken into consideration and analyzed in this essay is of one of the most popular football businesses worldwide nowadays, Juventus, who thanks to their marketing strategies, sponsorship deals, and player transfers in recent years, have had a colossal commercial success across the globe.
Juventus Football Club is a public company and a team based in Turin, in northern Italy, that was founded on November 1st, 1897 by a group of friends who shared a passion for football (The story of a legend). The team has been one of the most important and influential football teams in history and is the most successful Italian team ever, having won a total of 67 titles across all competitions (Top 10 Most Successful Italian Football Clubs of All-Time). Therefore, it is fair to say that also its history is one of the main factors that have granted this club such an immense commercial success worldwide.
Fundamental factors to consider when evaluating the commercial success of a business are the environment in which a team plays and its very own ecosystem. Juventus Football Club is arguably the most important and influential team in the first division of Italian football, the Serie A TIM. Juventus and the other 19 teams playing in the Serie A TIM are obliged to act under the rules and regulations set by the “Federazione Italiana Giuoco Calcio”, FIGC, also known as the Italian Football Federation. In the broader footballing environment on the other hand, there are two governing bodies which have supremacy over the domestic leagues and set their own guidelines that all clubs must respect. They are the governing body of European football, known as the Union of European Football Associations, UEFA (About UEFA), and the international governing body, called “Fédération Internationale de Football Association”, FIFA. These two associations grant an opportunity to all clubs across Europe and the globe to increase their recognition and commercial success thanks to competitions set up by them, such as the UEFA Champions League, in which Juventus has participated 20 times (History), the UEFA Europa League and the FIFA Club World Cup.
Within its ecosystem, however, there are many different factors that are essential for Juventus Football Club to play sports professionally and act as a business. Within the business, there is a countless number of personnel and factors that are necessary to enable a team to play football professionally and to have commercial success as a business objective. First of all, the shareholders and the owner are indispensable for a football club. The internal and external stakeholders of a club are also essential, these include the members such as the owner, the board of directors, and the administration team, who manage the business side of the club. On the other hand, those who run the sports side of the business are equally important, and some of them include the manager, his staff, and the players. Finally, the most important physical factor for a football club is its infrastructure, such as the stadium and the training grounds.
Considering the members of a sports franchise, a football club in this case, and the fact that Juventus is a public company the owner, the shareholders, and both, internal and external stakeholders, is certainly the most important figures of them all. A shareholder is “a person, a company or an institution that owns at least one share of a company’s stock” and the owner is he who owns the majority of shares. In the case of Juventus Football Club, the owner of the club since May 19th, 2010 is Andrea Agnelli (Andrea Agnelli) and he can be referred to as a majority shareholder because he owns over 50% of the shares of the club (Majority Shareholder).
When considering the ownership of a football club, such as Juventus, it is important to consider 8 ownership factors, the so-called ‘8 Ps of ownership’, and how they are relevant to the owner, Andrea Agnelli. Although these 8 points of ownership have to do with the owner, they are fairly important and have a significant impact on the commercial success of the football business. The first P stands for performance and it refers to whether the club is winning a game or not, whether it is in the relegation zone or at the top of the table. When Agnelli became the owner of Juventus, performance was one of the core ownership factors of the club because the team had recently gained promotion back to the Serie A after being relegated because of the ‘Calciopoli’ scandal, a match-fixing scandal (The Greatest Scandal). Therefore, the team’s performance was an essential aspect on which Agnelli had to make sure the team focused on during his upcoming years of his ownership. Thanks to Agnelli’s work, in the following 9 years Juventus Football Club managed to win 8 consecutive league titles, leading to greater commercial success. The club did not gain success only thanks to the owner however, there are many other figures that influence the club in many different ways. These are the so-called internal and external stakeholders.
Stakeholders are a “party that has an interest in a company and can either affect or be affected by the business. The primary stakeholders in a typical corporation are its investors, employees, customers, and suppliers”. Without both, internal and external stakeholders a business could not properly function as a professional sports club. Internal stakeholders are those who act within the club and they include the owner and the shareholders, who are possibly the most important ones, as well as the employees on the business side of the club and of course the players, the manager and his staff. All of these roles are occupied by professionals who are creating, marketing, and generating commercial opportunities for the football industry. The employees who lead the business operations of a football club and are just below the owner and the shareholders in the organizational structure are members of the board of directors. They determine the policies that the football club has to adopt, make plans and strategies and supervise the club’s activities and money flow. Furthermore, they are responsible for the development of the club. Further down the organizational structure of a football business is the Chief Executive Officer, CEO, who is elected by the board and the club’s shareholders and has the responsibility of making major corporate decisions, being the public face of the company, and acting as the main point of communication between the board of directors and corporate operations. On the other hand, the stakeholders who have a direct impact on the field for a football club are the players and the manager, together with his staff. In Juventus’ organizational structure, these roles are linked to the CEO through the Director of Football, whose responsibility can vary from club to club. Juventus’ Director of Football, Fabio Paratici is heavily involved in all aspects of the business, whose role includes the hiring and firing of managers, recruitment of players, and in the establishment of long-term strategies.
External stakeholders on the other hand are those individuals or groups outside a business, who can affect or be affected by the business. While being one of the most influential figures in terms of a club’s commercial success, fans are also the most crucial external stakeholder for a football club. They are the ones who support the club, go and watch games at the stadium, at home, or away and buy the team’s merchandise. Fans are crucial for a football club for several factors, they attract big-name players because the more exposure a team has, the more likely it is for a popular, world-class player to join them, and vice versa, the more great players there are, the more fans will be attracted. The profile of the club increases when the number of fans increases and therefore, the business gains recognition and commercial success. A second, important external stakeholder for a football club is the government of the nation in which the club acts. The government has a very important role and therefore influences businesses, given that it grants permission to operate, crafts consumer and employee rights, protection and safety regulations, and imposes taxes. Recently, the Italian government has imposed a new law, the so-called ‘Decreto crescita’, which was implemented from this summer onwards. This new taxation law allows business to save money on an employee’s contract by having to pay less taxes, according to certain criteria.
Due to the fact that it has a direct impact on football teams in Italy as well, Juventus Football Club has profited from it and saved up to £8 million for the transfers of Matthijs de Ligt, Rabiot, and Ramsey this summer. This is advantageous for Juventus because the funds they save can be re-invested into the club and used to buy new players or expand the stadium’s capacity, for example, leading to greater commercial success.
The government also has a crucial role when conducting a PESTLE analysis, ‘a framework or tool used to analyze and monitor the macro-environmental factors that may have a profound impact on an organization’s performance’. In the PESTLE analysis, the government is one of the principal examples of political and economic factors. Politically, the stability of the Italian government influences Juventus because instability may lead to uncertainty of possible investors to invest into the club, which would be damaging for a business of the stature of Juventus. Luckily for Juventus however, they have not felt a negative impact from the changes occurring in the Italian government in recent years. The government also imposes international trade regulations and tax policies which have an impact on player transfers from and to the clubs in Serie A. As previously mentioned, an example of this is the newly imposed taxation law called ‘Decreto Crescita’.
Economically, the government also has an important economic role for all football clubs in Italy, mainly due to government spending which is ‘expenditures on goods and services by federal, state and local governments’. In fact, following the incidents that occurred between Atalanta and Lazio fans during this year’s ‘Coppa Italia’ final, the Italian government began considering an expenditure to improve stadium security, with the intention of fewer fan-sparked riots occurring. Another economic factor that is crucial for football clubs is economic growth, and in the case of Juventus, it shows how it can help a club’s commercial success. In recent years in fact, given the increased investments in the club, the share price trend of the club has doubled, allowing Juventus to further invest this money into players and infrastructure.
The third letter of PESTLE stands for social and it indicates factors such as fashion and the role of a footballer in society. In terms of fashion, Juventus FC is a very socially influential club thanks to the branding, sponsorships and collaborations of its merchandise. In addition to the classic, home, away, and the third kit of every football club, Juventus have recently showcased their fourth kit in partnership with Palace, a streetwear brand, with the aim that fans wear their products in everyday life and not just for football purposes. This partnership is very advantageous for Juventus because it contributes to the club’s commercial success, given that it is more likely that people buy their shirt and therefore, the club’s revenue increases and the more worn the kit, the greater the public image becomes as well. Regarding a football player’s role in society on the other hand, a majority of the players in the Juventus men’s and women’s teams are considered role models for the younger and older male and female generations. People across the globe idolize footballers, and for a club like Juventus who, currently has some of the best and most renowned footballers in the squad, this is another reason for the club’s greater commercial success.
Technological factors that may have an impact on an organization include the progress of point of sales (POS) and the creation of mobile applications for example. A point of sale has always been the physical place where a customer executes the purchase and payment for goods and services. In such a digital world, however, technological advancement is a major influence and a business goal for every business, and it is one of the reasons why there are always more virtual points of sale and less physical ones. This is the case with Juventus Football Club as well, given that they only have a total of 6 physical points of sales, 4 in Turin and one in Milan and Rome. The club is greatly investing into the digital sector, through social media and applications that allow fans to follow the team’s news and even buy merchandise from, just like the website. Social media accounts and applications have a different impact on commercial success as applications do not really impact the club’s commercial success, unlike growing social media account that to greater recognition.
The fifth letter of PESTLE stands for the legal factors that affect a business and refer to how laws affect the operations of the business. In football, there are many laws and regulations that clubs have to follow, starting from the laws of the game to those that the football business has to respect. Arguably the most acknowledged regulation in football nowadays is financial fair play, a concept, developed and supported by the entire football family that recognizes the need for Europe-wide action to restrict some of the worst excesses of the game, such as exceeded spending on player transfers (Financial Fair Play). This regulation aims to ‘improve the economic and financial capability of clubs, increasing their transparency and credibility’ (Financial Fair Play), and therefore, it is considered that financial fair play contributed to the turnaround of club finances by restricting some of the most excessive loss-making clubs and bringing them back to operating at break-even (Financial Fair Play). Another set of regulations that football businesses need to obey to is those regarding the health and safety of fans for example. One of the main regulations in this regard are those set by the governing bodies of football such as UEFA, who are concerned about the state and maintenance of infrastructure such as stadiums. As stated in the UEFA Guide to Quality Stadiums, ‘the entire stadium structure must comply with national and local standards and building codes’ (UEFA Guide to Quality Stadiums) in order to prevent incidents that may harm those within the stadium.
Finally, the last letter of PESTLE, E, indicates the environmental factors that may affect a business or, in this case, Juventus Football Club. In the Sustainability Report published by Juventus in regard to the 2017-18 season, the club mentions that they embarked on a path to sustainability in 2013 that has led Juventus to approach its business with a more careful approach. In fact, one of the club’s priority themes is to relate the materiality matrix, ‘an important tool to identify the most relevant environmental and social priorities’, with the evolved business aspects of Juventus, whose main environmental goals are waste management and sustainable energy. The Serie A champions were one of the first three clubs to support the campaign organized by Adidas in collaboration with Parley for the Oceans to cut plastic pollution for the 2018-19 season. This collaboration, with eco-innovation and longevity at its heart, produced last year’s third kit for Juventus, which was entirely made out of recycled ocean plastic.
In conclusion, it is justifiably clear that the claim ‘commercial success is impacted by internal and external environmental forces, organizational capabilities and expectations of stakeholders’ are true. Throughout this essay, several factors were taken into consideration to evaluate their effect on the commercial success on a sports business, like Juventus Football Club. Arguably the main element of discussion in this essay is the club’s ecosystem, which discusses a vast number of topics such as the stakeholders, who have a direct impact on the business and vice versa, the 8 Ps of ownership, and the organizational structure, that affect the way Juventus Football Club is run, in addition to the growth and development of the club, which is greatly affected by its revenue and the specific revenue streams. Last but not least, this essay also evaluates the effect that the environment in which the business operates has on the club, given the factors discussed throughout the PESTLE analysis.
