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An individual will take advantage of several investment opportunities in the area of sports. There is every reason to believe that this sector will continue to expand, resulting in further opportunities. However, in order to create a workable and consequential business strategy, it is necessary to consider the possible gains in order to make a realistic and profitable investment. Furthermore, it is important to develop a thorough understanding of the problems involved. This paper will make an audit of the sport_x0092_s landscape in the context of sound investment decisions. It will explore the various investment avenues than an investor can exploit. It will also provide possible solutions to the challenges facing the industry. Closely connected to this is the issue of risks in investing in sports (both real and perceived risk factors). Most importantly, the paper will explore the most effective ways that investors can get revenue in both the short-term and the long-term.
The search for a business opportunity should incorporate identifying a viable and sustainable business initiative as well as considering the challenges thereof. Sports offer immense investment opportunity that carry a high rate of return on investment. However, prior to investing in sports, an investor should make an audit of the sports environment in order to make an informed decisions.
Like any other industry, the sports field is not immune to various business risks and challenges. According to Arthur, not having a personal experience in the industry could be a deterrent in investing in the field (2016). However, there is ample room to learn and be experienced. In this regard, a potential investor should make an audit of the identified business opportunity in sports in order to make an informed decision.
Why Invest in Sports
There is a strong rationale on the importance of investing in sports. To start with, sports businesses tend to command a lot of brand loyalty. For example, athletics command a lot of following among the fans. Arthur suggests that the sports_x0092_ stars can be used by businesses in order to turn around the fortunes of a company (2016). However, a company should avoid dependence on a few athletes in order to drive their marketing agenda (Conrad, 2011).
Second, the dynamic technological landscape has enabled more people to participate in sports in one way or another. For example, one can watch a game using a smart phone. The increasing channels of distribution translate to more exposure to sports. There is a strong and positive correlation between an increase in the technological innovations and the eventual consumption of goods and services.
Third, the sports industry is a highly competitive field. In order to get entry, there are a significant number of barriers that one must solve. Whereas this could be a disadvantage, it could also be an advantage. For example, if an investor is able to penetrate the market, the competition is less stiff. This is because other investors cannot easily penetrate the market.
Lastly, well established teams have a high probabilityof receiving media coverage. However, a company should evaluate the impact that press coverage will have on the business objectives. This is because it is not all the times that the press will have a positive impact to the business (Calzada, 2013). To make an allusion to Shakespeare, to be or not to be, that is the question.
Nevertheless, if the media is well-handled, therein lies a great business potential. The relationship between the media and sports companies is largely a symbiotic relationship. On one hand, the media gains from that emanate from the various sport events. On the other hand, the sport companies gain from exposure and marketing that is channeled and effected through the media.
A notable example of how a company can earn revenue is Nike. In fact, the company offers a marketing model par excellence that is worth emulating by other aspiring investors in sports. In relation to its competitors, Nike makes as much as nine times of the revenue that the closest competitor makes. Established athletes have constantly endorsed the brand and the company_x0092_s logo is one of the most recognizable logos in the world.
Adidas, though a reputable company in its own right, made a few missteps. For example, not being aggressive enough to sign Michael Jordan passed down in the company_x0092_s history as a grave mistake that have continued to haunt the company (Wakefield, 2007). However, the company has made a deliberate effort to redeem its reputation.
However, one does not have to start an ambitious company such as Nike in order to make it in the industry. If the capital is limiting, there is still room for smaller companies which can still do well. Furthermore, the market provides sufficient opportunities for investors who are only able to invest in small teams.
How to Get Revenue
One of the most effective ways is through merchandising in sports_x0092_ apparel. Sports merchandise include an athletic shoe line or shirts. If the business aims at targeting the global market, then it should identify the countries that do well in certain sports (Faloyin, 2011). For example, a company that is based in the USA can use the US basketball athletes in order to sell the brand to the world. Similarly, India, Australia, and the West Indies are known for cricket. In long distance running, Kenya and Ethiopia do quite well in the field.
The sale of apparel can bring significant revenue to the company. This can be sold online or through stores which are located in strategic places which are known to the fans. By extension, a company can deal with the merchandising of home goods, home décor, and other kind of accessories. Again, the sale of apparel is itself a marketing strategy. Consumers of such product usually buy them because of the brand name. Once they wear the clothing, it increases the visibility of the company or of the athlete thereby leading to a more solid brand name that passes as a strong investment.
All the same, a company should also manufacture products while being sensitive to various variables such as gender (Walker, 2007). In particular, more females are joining sport teams either as players or fans. Tapping this market is a matter of paramount importance. Inherently, women tend to be more conscious to fashion than men are- and sports companies can exploit this opportunity in order to increase revenue.
It is important not to do exclusion of any group of people during the marketing. For example, children may not have the purchasing power, but they always tell the parents what they want, and the parents do listen. Parents and caregivers are encouraging the children to be fan of certain sports and sports personalities (Walker, 2007). Children who play tend to have a more holistic growth and development, better creativity, better physical health, and are not confined to the classroom environment all the time. In other words, if the marketers want to have an impact in the society as a whole, they should offer value to the society, and the benefits will come back to the company.
At the same time, fans have a tendency to associate themselves with players who make a personal sacrifice in order to help the team (Wakefield, 2007). In fact, some of these personalities have a cult following. The company should identify such athletes and provide incentives that will make them stay longer in the company.
Partnerships form a reliable source of revenue for sports companies. For example, Detroit Tigers, went in partnership with Uber as its riding partner (Faloyin, 2017). During match days, the transportation app-based company would provide pick-up and drop-off services. Uber stated that it would make it easy for the players to put more focus on the game and not how to get from and to the stadium.
Overall, the sources of revenue in sports are the following:
Thus, the value of a company cannot be seen in the lens of tangible assets only. Intangible assets do matter too and can play an important role in improving the health of a business. However, intangible assets take long to build, and take a short time to destroy. For example, it takes a long time to build a solid reputation, and only one event to destroy the good name.
The Significance of Communication in Sports Marketing
Effective communication plays a critical role in executing the marketing campaign. In fact, the way a business communicates can either build or undo the reputation of a business. For example, the way the company communicates to the media will affect how the media will air your content. Being aggressive in an interview may make the editor present your company in negative light.
The power of communication cannot be underestimated when it comes to selling your brand to the existing and potential clients. In connection to this, a business should make a deliberate attempt to carry out value alignment in tandem with the values of the clients (Zimbalist, 2011). If the marketing department is able to sustain a loyal clientele, then the company benefits from the word-of-mouth campaign which is one of the most influential tools of marketing.
It is paramount that an investor offers value to the clients. For example, one can encourage school kids to participate in sports in order to have more discipline in life and avoid problems such as weight problems (Ekmekci & Ekmekçi, 2010). If a company is concerned about the welfare of its clients, then it wi8ns the trust of the clients. One of the most disastrous business mistakes is to summarize the entire relationship into a mere buyer-seller relationship. It grossly alienates the clients.
Studying sports in institutions of higher education have enabled managers to succeed in sports in the context of profitable business ventures. It is not uncommon to find universities offering courses that study the interaction between business and sports and the dynamics that affect it therein (Walker, 2007). Moreover, there are ample short courses that are available to impart skills that are needed for success in investing in sports.
Starting a Sports Business
The decision to invest in sports should come with a well-detailed plan. To start with, it is important that one carries out a comprehensive market research. At this stage, identifying the product positioning is critical. In addition to that, one ought to develop a business plan and also establish a brand design. Failure to do these things will translate to an inherent weakness in running the business and lack of competitive advantage.
The licensing is a major requirement which should be given the attention it deserves. By extension, licensing includes the issue of intellectual property rights such as trademarks and the materials which carry a copyright. The failure to jealously guard the intellectual property right could lead to outright threat of such materials.
However, there are a few challenges that one should be careful to address in order to gain a competitive advantage in the industry. According to Conrad, cartels are a major obstacle when it comes to the national and international sports market (2011). Cartels are stubborn in nature and they tend to thrive in a vicious cycle. Though the various court processes have challenged them, they continue to pose a great challenge to investment in sports.
Again, there is no guarantee that signing the best players is going to benefit the team. There has been cases where the most talented players have flopped (Zimbalist, 2011). It should be noted that the best players tend to have a lot of demands and require a hefty pay. It is not uncommon to find them threatening to defect to other teams thus holding their team ransom. In such cases, they become a burden to the company rather than an asset. There are also some risks that come with being associated with a certain athletes. For example, during the Australian Open 2017, Maria Sharapova announced that she had failed a drug test much to the horror of some sports companies such as Nike.
All the same, athletes have played a critical role in selling the sports product. They have created the link between the brand and the end consumer (Arthur, 2016). Marketers ought to be strategic in dealing with the athletes in a way that they will push their advertising agenda. For example, the clothes that one wears during the match day can be a great tool of advertising irrespective of the outcome of the game.
Lastly, any business model that deals with sports should be a sustainable model. For example, a company should make an evaluation of what is going to work not only in the present, but in the future as well. The business environment will not always bring good tidings- and the sports industry is no exception. Consequently, a company should lay strategies that is going to cushion the company during hard economic times (Faloyin, 2011). Such strategies should bear in mind the fluid market trends.
Notable Sports Statistics
Percentage of Adults Who Regularly Follow Sports (By Percentage %)
(67) Formula 1
(37) Moto GP
(41) Formula 1
(54) Formula 1
(23) Formula 1
(61) Formula 1
(44) Moto GP
(50) Basket ball
(60) Formula 1
Source: Global Sports Media Consumption Report (2011)
The value of sports in the industry cannot be underestimated. Similarly, making an investment in the sports industry is an ideal investment albeit a few challenges. In this light, a potential investor ought to lay down the potential benefits viz a viz the possible risks and challenges. Perhaps, studying the best practices of other companies in the sports industry is not a bad way to start.
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Ekmekci R. and Aytul A.Y. (2010). Sports marketing. Pammukale Journal of Sport Sciences, 1
Wakefield, K. L. (2007). Team sports marketing. Boston, Mass: Elsevier Inc.
Walker, P. (2007, October 1). Teamwork in Sports and Business. The CNN.
Retrieved from: http://edition.cnn.com/2007/BUSINESS/09/27/execed.rugby/
Zimbalist, A. S. (2011). Circling the bases: Essays on the challenges and prospects of the sports
industry. Philadelphia: Temple University Press.
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