Real Madrid Summary
Company: Real Madrid
Strategy:
1. “Professionalize” the management team 2. Exploit the enormous value of the Real Madrid brand and players’ images to increase revenues. 3. Impose financial discipline to ensure that the team did not become overextended. Key to this discipline was limiting the players’ expense. With the new strategy of Zidanes & Pavones, Real Madrid would sign one star player per year and focus on the development of players through the farm system or cantera.
Issues:
1. On the brink of bankruptcy. 1990’s Crisis: (Growth in revenues from TV rights; Greater investment of private personal fortunes; free-agent market) 2. Clean the debt by selling a training ground 3. Key to transformation would be modernization of its management. * Restructured the organization into four main units. * Implementing a variable pay structure. 4. Leveraging the Brand * Widen the scope of the brand by targeting international markets * New code of conduct promoted the values of honesty, transparency, and concurrence. * Three ways to exploit the brand:1. Sponsorship, image rights, advertising; distribution, merchandising, and licensing; and internationalization and new technologies. * Zidanes & Pavones 5. The Budgetary Process * Annual plan& midterm plan * Guidance of the strategic objectives and the assumptions provided by the corporate manager. * Revenue: Real Madrid transformed some areas of the stadium into VIP sections; preseason, international and exhibition games; TV rights; marketing revenues----attract additional sponsorship or player-endorsement deals * Expenses: payroll had been growing steadily over the past few years as new megastars joined the team; operating expenses also increase; Depreciation increased as the Club capitalized improvements to the stadium and the construction costs of “Ciudad del Real Madrid”; Transfer fees will decided by the end of the season, cause accelerated amortization.