Harvard Sample Business and Economics of Sports

BUSINESS AND ECONOMICS OF SPORTS 1
Business and Economics of Sports
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BUSINESS AND ECONOMICS OF SPORTS 2
Business and Economics of Sports
Part 1
The New York sports club is one of the institutions in the United States that serve as an
athletic club hence participating in many sports. This club is a private social club, which is based
on invites only and is located in New York City. This club offers many sports including;
swimming, soccer, tennis, rugby, wrestling and even boxing (Mills and Fort, 2014, p.207). This
club was initially started as a gymnasium after an increase in organized athletics in England. The
main goal for its development was to keep official records of the different sports and to sponsor
athletic competition in New York (Mills and Fort, 2014, p.211). It offers training opportunities
across eight states and other neighboring countries.
New York sports club provides and maintains the largest gym network in the world and
therefore providing services to people with fitness needs (Andreff, 2014, p.20). For a very long
time the club has been competitively giving its members exemplary services therefore making it
one of the best clubs in New York. The club therefore has created the perfect training
environment for its members making them feel more at home.
This club has been chosen because it’s among the largest sports club in New York
therefore provides a perfect overview of all the other clubs in the city .It has also been chosen
because it accommodates most of the sports in New York therefore most probably has and ,can
provide accurate financial information of all this sports. This club can also be able to explain the
different sources of finances for all this sports and how these funds are spent.
BUSINESS AND ECONOMICS OF SPORTS 3
Financial status
The financial status of the company has been positive over the years. This is occasioned
by firstly, the progressive increase in member count since it was opened. The increase in
members creates more income for the club due to the membership fee that is charged to every
new person joining the club (Andreff, 2014, p.20). The members also pay for other services that
are available at the club such as body massages, food and drinks, space to host events among
others therefore enabling the club to generate more income to be used in its own maintenance.
Secondly, the club has not experienced many debts over the years. Following the
financial records it has been seen that the club debts have not increased this is because borrowing
has not been done due to the nature of the services offered at the club. For example, gym
equipment have been bought once and maintenance is what has been required to keep the
equipments safe and useable. Moreover, sports equipment such as tennis and badminton rackets
are personal in that members carry their own thus reliving the club expenses associated with
buying sports equipments. We can therefore conclude that this club experiences minimal debts
over the years thus financial status of the club can be said to be healthy.
Owing to the continuous increase in membership numbers, the club also sees to it that
more people are employed to help in delivering quality services to their customers. This is shown
by the increased payroll expenditure in the financial reports of the club. Factors such as
employee motivation and incentives for the employees also contribute to slightly higher payroll
expenditure as compared to recent years. Moreover, the company gives medical insurance covers
to all its employees that in handy incase an employee falls ill or gets injured accidentally while
on duty for example when a cook gets burnt in the kitchen while cooking. Allowances such as
BUSINESS AND ECONOMICS OF SPORTS 4
transport and housing are awarded to employees thus increasing the clubs general expenditure on
its personnel.
Thirdly, finances on club operations have been experienced positively. These club
operations include events organized for the members such as team building on different
companies and also the members also competition galas among others. For the team building
activities the club receives payment for the facilitator of the team building experience, catering
services offered to them alongside the grounds provided to them for the activities. During the
competition galas the club receives funding from sponsors and government that they use to
renovate and refurbish the club facilities. In case club members participate in the sporting
activities the club receives payments if they emerge among the top or simply for participating in
the competitions.
Administrative costs include cost incurred for training of the administrative staff and
dinners attended by directors and founders for networking purposes (Cavagnac, 2009, pp.299-
313). This has a positive effect for the club since they are able to equip them with necessary
knowledge to operate the club at very high standards and also to get more insights as to how to
expand the club.
Other expenses incurred may include payment of tenders awarded to various companies
for supplying the club with various requirements for example the training equipment used in the
club, sports materials and food items (Peeters, 2015, p.1277). These companies may also be
involved in offering services to the club such as cleaning services and security which are integral
to the running of the club
BUSINESS AND ECONOMICS OF SPORTS 5
Part 2
The English premier league is one of the most popular professional team sports league
known all over the world. It is the top most ranked league with the highest number of high end
clubs, has a high transfer fee, high attendance and is the most exciting league to follow. It
consists of 20 clubs and at the end of each season the three poorly performed clubs are relegated
to the first division and three teams that were initially in the first division are promoted to the
premier league (Martinez and Willner, 2017, pp. 49-60). This shows there is a high rate of
competition in the league. The league’s season come about every year from mid-August to May
the following year. Team plays a total of 3 matches, that is to say two matches against each team.
The two matches involve one at home ground and one away from home. The premier league
timetable is set such that most games fall on weekends and in some cases on the weekdays
evening (Martinez and Willner, 2017, pp. 49-60).
English premier league started in 1992. Since it was founded, a total of 47 teams have
participated in the league but only six have been able to win the ultimate price. This basically
shows existence of tough competition which has enabled the league to thrive and acquire a large
fan page. Also the fact that the players that participate in English premier league come from 67
different nations has increased the popularity of the league.
The soccer statistics
Manchester City was the first team to start using the statistics from football to start
analyzing games. From then different teams started analyzing their performance in order to be
able to predict future games and rate their level of performance. Historically, soccer suffers from
lack of public data since it was not analyzed in the past.
BUSINESS AND ECONOMICS OF SPORTS 6
Analysis of competitiveness
The competitiveness of teams in the premier league can be measured by looking at the
number of wins that occur each season (Denaux Z., Denaux, D., and Yalcin, pp.117-127). It is
also important to look at the win margin and put into considerations the large win margins.
Normally a win by 4 goals and above is considered to be a better win than any other.
Competitive balance in sports is often used to justify the revenue sharing agreements.
This is explained that competitive balance leads to high attendance in a league and high
attendance leads to a high generation of revenue. The sharing of revenue enables small teams to
afford high quality talent, which is to mean they can buy players with high skills. This ensures
equal distribution of the talent in all teams hence a fair competition.
Data: The number of goals scored by different teams in English premier league
Team
2011-12
2012-13
2013-14
2014-15
2015-16
Bournemouth
0
0
0
0
45
Arsenal
74
73
68
71
65
Burnley
0
0
0
28
0
Chelsea
65
75
71
73
59
Cristal Palace
0
0
33
47
39
Everton
50
55
61
48
59
Hull
0
0
38
33
0
Leicester
0
0
0
46
68
Liverpool
47
71
101
52
63
BUSINESS AND ECONOMICS OF SPORTS 7
Man City
93
66
102
83
71
0Man united
89
86
64
62
49
Middlesbough
89
86
64
62
49
Southampton
0
49
54
54
59
Stoke
36
34
45
48
41
Sunderland
45
41
41
31
48
Swansea
44
47
54
46
42
Tottenham
66
66
55
58
69
Watford
0
0
0
0
40
West Brom
45
53
43
38
34
West Ham
0
45
40
44
65
(Source: Martinez and Willner, 2017, p.53)
This clearly shows the number of teams that attended the English premier league and the
way they performed in regards to the number of goals they scored. There areas where several
teams show zero goals, this is a clear indication that in that season they were absent (Martinez
and Willner, 2017, pp.49-60). Proving from the data, the teams that were absent are not so many
and they were not absent in the whole period the data was taken. This clearly shows that English
premier league has a good attendance and also there is a competitive balance in their
performance.
BUSINESS AND ECONOMICS OF SPORTS 8
Attendance of English premier League
(Source: Denaux et al., 2011, pp.117-127)
Season attendance of the English premier league
The attendance started at a low rate in 1975 but rose steadily to date. This can be
explained because of the increasing rate of birthrate after the world war as at 2015, the
attendance grew to almost 800,000 (Denaux et al., 2011, pp.117-127). This shows that the
premier league has many fans and it’s a competitive league.
Analysis
Measures of competitive balance
They include dynamic competitive balance ratio and competitive balance ratio.
Competitive balance ratio does not capture season-to-season changes in relative standings. It
BUSINESS AND ECONOMICS OF SPORTS 9
reflects team specific team specific variation and league specific variation, which is determined
by identification of annual attendance in professional sports (Owen, 2010, pp.38-41). Like in the
graph above, the attendance grows every year from the year 2015. It is a more of observation
method therefore considered useful in metric.
Dynamic competitive ratio is developed from other metrics and allows each team to be
measured differently in different periods (Sloane, 2015, p.4). Its length can be increased to suite
the different times. This makes it to improve the competitive balance method in order to correct
different issues in current competitive balance. The teams can be measured in accordance with
the number of goals they score and the number of cards they receive. This research determines
the importance of competitive balance in the different sport league (Sloane, 2015, p.6). That is
by checking the teams that score the highest number of goals per game and the team with the
highest point. In a nutshell, dynamic competition provides knowledge, understanding and an
application of competitive balance thus leading to an improvement of sports. This improvement
is an advantage to the fans, managers and other stakeholders.
Structural changes
The competitive advantage may bring about structural changes in the English Premier
League structure such as how to treat the best team and the bottom teams. As at now, the top
teams in the premier league are given a monetary reward and in addition the best team goes
home with a trophy (Martinez and Willner, 2017, pp. 49-60). The bottom three teams are
degraded to the upper division so that they don’t participate in the next season of the EPL.
BUSINESS AND ECONOMICS OF SPORTS 10
Ownership changes
When a club performs well in the EPL games, they gain sponsors and by new skilled
players from the clubs that do not perform well (Lee and Fort, 2012, p.271). This means that,
competitive advantage can influence how the players move from one club to another. Also,
players of the teams in first division can be bought with other teams since they will be no longer
participating in the league.
Intervention policies
Policies are asset of rules that people should follow. Some of the policies developed in
the sport sector are; doping policies of how crowds can be controlled in events, policies on how
junior will be treated in sports, policies on financial management, policies on how the conduct of
each and every participant in the sports (Alavy, Gaskell, Leach, and Szymanski, 2010, p.75). For
instance, an athlete found guilty of using some substance in order to enhance his or her
performance should be banned from ever taking place in the sporting activities.
BUSINESS AND ECONOMICS OF SPORTS 11
References
Alavy, K., Gaskell, A., Leach, S. and Szymanski, S., 2010. On the edge of your seat: Demand for
football on television and the uncertainty of outcome hypothesis. International Journal of
Sport Finance, 5(2), p.75.
Andreff, W., 2014. Building blocks for a disequilibrium model of a European team sports league.
International Journal of Sport Finance, 9(1), p.20.
Cavagnac, M., 2009. Revenue sharing and competitive balance when teams are not wage takers.
Review of Industrial Organization, 35(3), pp.299-313.
Denaux, Z.S., Denaux, D.A. and Yalcin, Y., 2011. Factors affecting attendance of major league
baseball: revisited. Atlantic Economic Journal, 39(2), pp.117-127.
Lee, Y.H. and Fort, R., 2012. Competitive balance: Time series lessons from the English Premier
League. Scottish Journal of Political Economy, 59(3), pp.266-282.
Martinez, M. and Willner, J., 2017. Competitive Balance and Consumer Demand in the English
Football League. Applied Finance and Accounting, 3(2), pp.49-60.
Mills, B. and Fort, R., 2014. Leaguelevel attendance and outcome uncertainty in US pro sports
leagues. Economic Inquiry, 52(1), pp.205-218.
Owen, P.D., 2010. Limitations of the relative standard deviation of win percentages for
measuring competitive balance in sports leagues. Economics Letters, 109(1), pp.38-41.
Peeters, T., 2015. ProfitMaximizing Gate Revenue Sharing in Sports Leagues. Economic
Inquiry, 53(2), pp.1275-1291.
Sloane, P.J., 2015. The economics of professional football revisited. Scottish Journal of Political
Economy, 62(1), pp.1-7.

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