PEST AND INDUSTRY ANALYSIS: ARSENAL FOOTBALL CLUB

1. “The Gunners” PEST AND INDUSTRY ANALYSIS:ARSENAL FOOTBALL CLUB

2. Arsenal Football Club English Premier League Football Club based in London, England One of the most successful clubs in English Football, having won 13 first division and premier league titles and 10 FA cups Arsenal's parent company, Arsenal Holdings plc, operates as a non-quoted public limited company Only 62,217 shares in Arsenal have been issued and are not traded on a public Exchange such as FTSE. In April 2010, business magazine Forbes ranked Arsenal as the third most valuable football team in the world Directors with significant investment in the club include Stan Kroenke,Danny Fiszman,Peter Hill wood Lady-Brace well Smith and Alisha Usmanov Thierry Henry is the club's top goalscorer with 226 goals in all competitions between 1999 and 2007,having surpassed It’s the only club with most consecutive seasons spent in the top flight (84 as of 2010–11 The longest run of unbeaten League matches (49 between May 2003 and October 2004 Snapshot:

3. Political Factors Stringent Employment Laws amongst players (Work Permits) Consumer protection (Setting of price caps by the government) Emphasis on Environmental protection (Noise pollution) Adherence to effective safety standards (Threats arising from terrorism) Imposition of high taxes by the government (wages) PEST ANALYSIS

4. Economic Factors Shift of economic climate (transition from recession to recovery) High concentration of people in the Capital (London) High immigration rates of foreigners, especially Asians and Africans Low inflation rates which affords people high spending power Production rates are higher due to the increase in the number of jobs Pest analysis

5. Social Factors High diversification rates, which promotes passion for the games People are characterized to be workaholic, which stimulates national economy High Preference on leisure (Peoples’ lifestyle is “Sports Nut”) Soccer has inspired adults, young adults and even the aged Improved living standards due to reasonable pay PEST ANALYSIS

6. Technological Factors Increase in E-commerce (Online shopping) Improvement in match day experience for fans with integrated IT management Use of Buffalo technology to protect data Utilization of PROZONE3 for match day analysis. PEST Analysis

7. PEST ANALYSIS

8. English Premier League World's most lucrative football league Combined club revenues of £1.93 billion ($3.15bn) in 2007–08 Total club revenues of €2.326 billion in 2008–09 The second most profitable after the German Bundesliga Premier League clubs are some of the richest in the world Deloitte listed seven Premier League clubs in the top 20 for the 2008–09 season It’s ahead of Spain’s La liga and Italy’s Serie A A total of 43 clubs have competed in the Premier League Industry Analysis

9. Guaranteed ticket availability for all league matches at Emirates Stadium Over 140,000 made available to red members last season 1500 guaranteed tickets for all premier league matches The friends and family option-offers you the opportunity to purchase multiple tickets on your membership card. Membership Benefits

10. Porter’s Five Competitive Forces

11. Bargaining Power of customers Bargaining leverage is neither high, neither low Buyer volume upon successful times are high Buyer information can be considered high Brand identity is strong Price sensitivity is not extremely high Product differentiation is very high Buyer concentration vs. industry is low Many substitutes are available Porter’s Five Competitive Forces

12. EPL Most Expensive Tickets Premier League’s ticket prices

13. Threat of Substitution Low switching costs Buyers are not highly inclined to substitute Price-performance, to a certain level, has no influence on the proffered team Trade-off of substitutes Porter’s Five Competitive Forces

14. Bargaining power of suppliers High diversity of suppliers Volume is important to supplier Inputs have a high impact on costs and differentiation Switching costs of firms in the industry are low There is a low Presence of substitute inputs Porter’s Five Competitive Forces

15. Threat of New Entrants There is quite an easy access to inputs There is economies of scale High capital requirements There are strong brand identity in the soccer sector of the sports industry Switching costs are high Easy access to distribution Low expected retaliation from well established teams Porter’s Five Competitive Forces

16. Arsenal’s squad averages 23.2 years which offers potential for growth and maturity. Arsenal’s Future

17. Rivalry High exit barriers Low industry concentration High fixed costs/High value added Low industry growth Low product differences Low switching costs High brand identity High diversity of rivals Porter’s Five Competitive Forces

18. PORTER’S FIVE COMPETITIVE FORCES

19. Arsenal FC As a entity, the club has expanded the width of its market by exploring other areas such as India and America Arsenal FC has embarked on a strategy of saving energy costs, emulating key competitors in total revenue by 2015. Buyer utility maps and buyer cycles are measures employed by the club to study supporters’ preferences and enhance satisfaction. By adopting such measures, the club will effectively utilize the BOS by making competition from other clubs irrelevant. Blue Ocean Strategy

20. Potential Future Changes Foreign investments by individuals imposes financial burden (massive debts among clubs) Wage caps should be in place to fend off astronomical wages paid to players The FA needs to impose a ban on the “Big four” clubs regarding the amount and number of players they can sign (stabilize competition) Goal line technology should be enforced to enhance fair play. Buyers should also have a say on the maximum amount they are willing to spend on tickets. Conclusion

21. Arsenal Football Club Competitor and Market Analysis

22. “The Big Four” Key Competitors:”THE BIG FOUR”

23. La Liga Key Competitors

24. Serie A Key Competitors

25. CHAMPIONS LEAGUE CONTENDERS OTHER COMPETITORS:EPL

26. EPL vs. Other Major Leagues

27. Stadium Capacity The stadium opened in July 2006 and has an all seated capacity of 60,355 Second largest football club stadium in England behind Manchester United's Old Trafford Management Recently appointed three senior executive positions at the Club Tom Fox (Chief Commercial Officer), Svenja Geissmar (General Counsel) and Trevor Saving (Head of People and Operations) All three will report into Chief Executive Officer, Ivan Gazidis Ownership In total, Arsenal's board of directors currently hold 45.6% of the club's shares The largest shareholder on the board is Stan Kroenke, with 18,240 shares (29.9%) owned via Kroenke Sports Enterprises Next is Danny Fiszman who holds 10,020 shares (16.1% Richard Carr has 2,722 (4.4%) and club chairman Peter Hill-Wood owns 500 (0.8%) Minor shareholders of the club, including former players Ian Wright and Liam Brady, and three shares owned by the Arsenal Supporters' Trust. Arsenal FC

28. A Total of 25 players from various countries. Goalkeepers Manuel Almunia(Spain),Lukasz Fabianski(Poland),Jens Lehmann(Germany),Wojciech Szczeny(Poland) Defenders Bacary Sagna(France),Laurent Koscielny(France),Johan Djourou(Switzerland),Kieran Gibbs(England),Thomas Vermaelen(Belgium),Sebastian Squillaci(France),Gael Clichy(France) Midfielders Abou Diaby(France),Cesc Fabregas(Spain),Tomas Rosicky(Cech Republic),Samir Nasri(France),Denilson(Brazil),Aaron Ramsey(Wales),Alex Song(Cameroon),Jack Wilshere(England),Andrey Arshavin(Russian),Emmanuel Eboue(Ivory Coast),Emmanuel Frimpong(Ghana) Strikers Robin Van Persie(Holland),Theo Walcot(England),Marouane Chamakh(Morocco),Nicklas Bendtner(Denmark) First Team Squad

29. Revenue and Net Profit Match day revenue is rather comparable between Man Utd and Arsenal Media revenue is higher for Man Utd due to the further progress in Champions League and EPL Arsenal did much better commercially on and off the field due to 156M made in property development Profit from the sale of players has tripled that of Man Utd due the club’s reputation of selling players at good values. Arsenal FC vs. Manchester Utd

30. Which Club has a better future Opportunity for growth? Player Sales: On the field, I rate both teams equally in their ability to progress to later group stage and be in the top four in the EPL. Arsenal have a greater propensity for revenue stream from player sales. Man Utd do not traditionally monetize this area well Overall, in terms of adding value to shareholders, Arsenal is the better investment. Cash level, Debts and Assets Analysis Man Utd had twice the amount of total assets compared to Arsenal in 2010 The increase in Debtors within one year from 278 mil to 675 mil puts Arsenal in a better financial position in terms of the interests paid to finance the debts Potential for growth

31. Free Cash flow, Depreciation and Interest Expense Arsenal operated under a superior cash flow compared to Man Utd This reflected lower interest payments and lesser capital expenditures The club was in a better shape due to good profits and lower depreciation compared to Man Utd The interest expense as a percentage of total debt is higher for Man Utd at 10% compare to 6% for Arsenal indicating much higher cost of capital. Man Utd tend to be net buyers of players instead of sellers which is why their net capital expenditures is higher than that of Arsenal Right now Arsenal can probably pay down its debts due to its effective FCF. They paid down 135 mil in debts this financial year. Arsenal vs. Man Utd

32. Commercial, Broadcasting and Match day Revenue Real Madrid FC ranks first in terms of commercial revenue(Sale of jerseys and other endorsement deals) Arsenal and Man Utd boast huge earnings in terms of match day revenues(high price tags on tickets) Real Madrid FC also earns massive profits from the sale of its broadcasting rights(Exert a Monopoly power over other teams) Arsenal Revenue Statistics vs. Other Clubs Revenue Reflections

33. English Premier League World's most lucrative football league Combined club revenues of £1.93 billion ($3.15bn) in 2007–08 Total club revenues of €2.326 billion in 2008–09 The second most profitable after the German Bundesliga Premier League clubs are some of the richest in the world Deloitte listed seven Premier League clubs in the top 20 for the 2008–09 season It’s ahead of Spain’s La liga and Italy’s Serie A A total of 43 clubs have competed in the Premier League Market Size

34. Corporate Structure Operated as a corporation and is owned by the 20 member clubs Chairman, Chief Executive and Board Of Directors oversee daily operations The FA has VETO power when new rules are adopted by the premier League Sponsorship The Premier League has been sponsored since 1993 1993-2001: Carling( FA Carling Premiership) 2001-2004-:Barclaycard(Barclaycard Premiership) 2004-2007:Barclays(Barclays Premiership) 2007-Present:Barclays(Barclays Premier League) Key Trends

35. Finances The Premier League has the highest revenue of any football league in the world Total club revenues of €2.326 billion in 2008–09 Premier League clubs are some of the richest in the world "Football Money League", listed seven Premier League clubs in the top 20 for the 2008–09 season Stadia Stadium attendances are a significant source of regular income for Premier League clubs Combined total capacity of the EPL in the 2010–11 season is 770,477 with an average capacity of 38,523 For the 2009–10 season, average attendances across the league clubs were 34,215 Total aggregate attendance figure of 13,001,616 Continued: Key Trends

36. World’s Favorite League EPL has risen well above Serie A and La Liga in the past year by €1 billion (£0.7 billion). Games are broadcast to 600 million homes in 202 Countries across Europe, Asia, Australasia, Oceania, Africa, the Americas and the Middle East The global rise of the Premier League Overseas rights 2010-2013 £1.7bn? 2007-2010 £625m 2004-2007 £325m 2001-2004£ 178m Growth rate: EPL

37. Arsenal FC/EPL East Asia, Africa, Middle East, the US, Canada and Australia Potential Sources for maximization of revenues overseas Premier League giants Such as Arsenal and Chelsea are now focusing their markets in India WHY INDIA FOR ENGLISH CLUBS? Population of 1.15bn Underlying interest in football/Premier League Untapped commercial opportunities Wealthy target audience in Indian middle class Football identified with youth - there are 325m Indians aged 20 - 35 Chance to influence/improve local football Opportunity for corporate social responsibility (CSR) input Target Market

38. United Kingdom and Ireland Revenue from television rights has helped sustain clubs both on and off the field Major media sponsors include Sky, BBC and ESPN The Premier League sells its television rights on a collective basis The first Sky television rights agreement was worth £304 million over five seasons The league brought in £320 million from the sale of its international rights (2004-2007) Television rights alone for the period 2010 to 2013 have been purchased for £1.782 billion Media Coverage

39. Worldwide Media Coverage plays a vital role in enhancing the EPL Most watched sporting league, followed worldwide by over half a billion people in 202 countries In the US, coverage is shared between Fox Soccer Channel, Fox Soccer Plus and ESPN In Canada, Rogers Sports net owns the Premier League rights The Premier League is particularly popular in Asia(widely distributed sports programme) In China, data from 2003 suggested that matches were attracting television audiences between 100 million and 360 million Continued: Media Coverage

40. Market Segmentation

41. Performance measure of team success/failure Winning a certain number of games every season Qualification for the European competitions Gaining maximum points from weaker teams Conceding less goals as possible and scoring as many as a team can Focusing on winning silverware both domestically and Abroad Making efforts to try and operate as more environmental friendly organizations These include waste minimization, waste disposal and energy & water use Competitor’s Analysis

42. Competitors’ Analysis: Teams that keep managers for long spells show more success than those that change management often Team success(winning trophies) generates revenue for the club Clubs that operate under effective cash flows are able to avoid massive debts and high interest payments. Revenue maximization can be achieved by eliminating the monopoly in television rights(Sky) Penetration into new markets such as India can easily boost a c lub’s financial capacity Brand Loyalty is enhanced by clubs’ participation in community activities Market Segmentation enhances clients/clubs relationship Club’s focus on operating environmentally friendly has other teams embarking the same policies which in turn safeguards the environment. Conclusion

43. Arsenal FC Internal and SWOT Analysis

44. BUSINESS MODEL

45. BUSINESS MODEL

46. BUSINESS MODEL Why is Arsenal’s Business model different from other teams? • Conservative financial approach(price cap on wages and transfer fees) • Infrequent change in team leadership/management(Arsene Wenger has been in charge since 1996) • The clubs uses a unique style of play(avoidance of long balls and play is mostly centered on the middle) • Sell players at a profit(Marc Overmass was initially bought for £5.5m and later sold to FC Barcelona for £22.3m • Effective use of the academy to groom young players(Jack Wilshere)

47. Revenue vs. Ependitures:2005-2011

48. Levels Of Investment Arsenal generates a huge portion of its annual revenue through various sources. These includes television revenue, commercial revenue and the transfer of players. The overall idea of setting a price cap on the amount of money that can be spent on a particular player has proved vital in club investment. All proceeds generated from such transactions are carried forward to the next budget in the following year. Arsenal’s Financial Report Arsenal FC: Revenue

49. Arsenal FC: Resources

50. Arsenal FC Stars (=high growth, high market share) – Asia Cash Cows (=low growth, high market share) – England Dogs (=low growth, low market share) – Americas Question Marks (= high growth, low market share)- India BCG Matrix