HYPOTHETICAL CASE SCENARIO
The Real Madrid Futbol Club is thinking about expanding its brand in the United
States to build youth soccer academies and a professional franchise team, a soccer-specific stadium that will host league matches, international matches, concerts and other family entertainment operations. They are considering buying into either Major League Soccer (MLS) or United Soccer League(s) (USL) franchising systems to be located in the Phoenix metropolitan areas in Arizona.
The goal is to develop partnerships to enhance the brand value of Real Madrid in the US from the grassroots level to the professional league levels through connecting the commercial, business, youth and grassroots components and
other market opportunities.
The North American professional soccer market is a primary target for foreign soccer clubs like Real Madrid that seek to extend their brand, identify new players, produce new revenues, generate new channels of distribution, extend
and establish their global fan base, and other global branding and marketing opportunities.
Some foreign clubs have attempted to enter the North American market and have failed. A general lack of understanding and partnerships were related to not achieving desired results. Developing a brand in the U.S. is a long-term initiative that requires partners that understand the local, regional and national market, the business of sport in the US, more particularly, the business of professional
soccer/futbol, in North America.
An MLS or USL professional franchise can serve as an access point to European clubs for players from North, Central, and South America. A European club like Real Madrid can utilize the MLS or USL as a competitive platform as a proving
ground or development arm for players before moving to Europe to play at the higher levels (a farm-team or feeder-system so-to-speak). MLS and USL envision foreign clubs to directly own a franchise or at least be part of an owner/investor group that operates the franchise. Minimally, foreign clubs like Real Madrid have the opportunity to obtain a partial stake in an MLS or USL franchise where MLS and USL can provide connections for prospective franchises to affiliate and build these partnerships and expanded brand operations.
1. MLS and USL franchises contain a vertically integrated club structure that contains programs from recreational youth to the professional ranks. How would you recommend Real Madrid create formal relationships and affiliations with
major youth clubs in Phoenix that can become directly linked to the club? What would that model look like? Would it be better to develop their own youth club and academy system? Compare and contrast the two models. Defend your positions.
2. Some foreign clubs want to mitigate their risk of investment by attracting US-based partners that can operate the franchise. In other words, let one partner conduct the business side of things (i.e. stadium management and operation, concerts, other events, etc.) and let the other partner handle all soccer-related
activities (i.e. the team itself, youth development systems, etc.). What would be a compelling reason Real Madrid can offer a potential investor partner to help mitigate that investment risk? Defend your answer.
3. Some international clubs may not want to do the above, but desire to create and fully own a professional franchise in North America. What problems and challenges does this scenario present for long-term business development,
commercial activities, the grassroots movement, fan development, player development, understanding the market, other opportunities and operations? Defend your answer.
4. Foreign clubs like Real Madrid can establish a relationship in a specific market like Phoenix with opportunities for a nucleus of affiliations throughout other segments of North America. Discuss the differences between planning for
domestic and planning for international activities. What are several potential
problems Real Madrid is likely to encounter doing business in the US? Recommend possible solutions. Defend your answer.
5. Differentiate among domestic market extension orientation, multi-domestic market orientation, and global marketing orientation for the Real Madrid's case. Describe how the orientation guides international operations for Real Madrid in the US. Provide examples of new market and revenue opportunities. Defend your discussion.
Please make sure you answer these questions in an in-depth and substantive manner. Make sure you tap into leading experts' in the field, their work through publications, trade journals, industry magazines, other textbooks, and case studies, etc.
Running Head: Expanding a Real Madrid brand internationally
Expanding a Real Madrid brand internationally
How Real Madrid can create formal relationship and affiliations with major youth clubs in Phoenix
Real Madrid can create formal relationship and affiliation with major youth clubs in Phoenix such as United Soccer League (USL) and Major Soccer League (MLS) through franchising. Soccer is a fast growing segment in the United States especially with the huge Hispanic population that is a solid fan base for soccer (Quelch, 2007). A franchising entry model will through franchises that are well established, understand the market needs and the geographical scope. USL and MLS have well documented and efficient business system that are vertically integrated. Real Madrid can agree to strict operational rules and receive royalty payments from the franchisees based on percentage sales. Through this Real Madrid will be able to expand its brand in the US by giving the franchisees the right to use their brand name, business systems, processes and marketing. This is a good and efficient way to expand fast without incurring risk or providing high capital (Aliouche & Schlenntrich, 2010). USL and MLS franchises' unique business enables franchisees allows franchisees to add USL or MLS franchises to their model to form club systems ranging from youth clubs to professional clubs (USL Soccer.com, 2011; Hardy, 2011). Real Madrid can follow the "think global act global as much as possible" brand expansion strategy as shown by Richelieu and Desbordes (2009), which provides a brand with better chances of being accepted abroad at a lower financial risk. Since these two understand the American soccer market and fan base and also understands the market structure and already have a brand name in the US market, Real Madrid can for a franchise relationship with either of the franchises who will extend the Real Madrid brand in the US market, establish new players, produce new revenues, generate new channels of distribution and extend and establish their global fan base.
The franchise international expansion model would take into account major elements that are required in developing an optimal international expansion initiative. This expansion model may require an initial outlay in forming the franchise relationship. Real Madrid can buy an MSL or USL franchise and these provide successful franchise systems for the club to form their clubs and leagues in the US. The franchise will use Real Madrid's brand and processes in expanding the Real Madrid brand and pays the franchiser royalty payments based on percentage performance. It would not be better for them to develop their own youth clubs since they do not fully understand the workings of the US soccer culture and systems. It would be expensive to acquire the necessary market information and it would require a much higher outlay to develop their own youth club and academy system.
Unlike a model where Real Madrid has to develop it Club, using franchising model allows Real Madrid to tap into the US market needs and to be able to acquire important market intelligence. It is also a good and efficient way to expand fast without incurring risk or ...
A hypothetical case scenario is examined to examine expanding a brand internationally.