1. UNIQUE FEATURES & 3 SECTORS.pdf

UNIQUE FEATURES OF SPORT 1) PASSION FOR SPORTS: A unique feature of sport is the phenome non of people developing irrational passion for sporting teams, competitions, or athletes. Sport has a symbolic significance in relation to performance outcomes, success and c...

UNIQUE FEATURES OF SPORT 1) PASSION FOR SPORTS: A unique feature of sport is the phenome non of people developing irrational passion for sporting teams, competitions, or athletes. Sport has a symbolic significance in relation to performance outcomes, success and celebrating achievement that does not occur in other areas of economic and social activity. Sport managers must learn to harness these passions by appealing to people‘s desire to buy tickets for events, becomea member of a club, and donate time to help run a voluntary association, or purchase sporting merchandise. They must also learn to apply clear business logic and management techniques to the Maintenance of traditions and connections to the various aspects of sports. 2) SOURCE OF INCOME: There are marked differences between sport organizations and other businesses in how they evaluate performance. Private or publicly listed companies exist to make profits and increase wealth of shareholders or owners, whereas in sport, other imperatives such as winning championships/tournaments, providing services to stakeholders and members, or meeting community service obligations may take preference over financial outcomes. Sport managers need to be aware of these multiple organizational outcomes, while at the same time, be responsible financial managers. 3) WORK FOR A COMMON ADVANTAGE: Competitive balance is also a unique feature of the interdependent nature of relationships between sporting organizations that compete on the field but cooperate off the field to ensure the long term viability of both clubs and their league. In most business environments the aim is to secure the largest market share, defeatall competitors and secure a monopoly. In sport, clubs and teams need the opposition to remain in business, so they must cooperate to share revenues and playing talent, and regulate themselves to ensure the uncertainty inthe outcome of games between the m,so that fans‘ interest will be maintained. The sport product, when it takes the form of a game or contest, is also of variable quality. While game outcomes are generally uncertain, one team might dominate, which will diminish the attractiveness of the ga me. The perception of those watching the game might be that the quality has also diminished as a result, particularly if it is your team that loses! The variable quality of sport therefore makes it hard to guarantee quality in the marketplace relative to providers of other consume r products. 4) BRAND LOYALTY IN SPORTS: Sport also enjoys a high degree of product or brand loyalty, with fans unlikely to switch sporting codes because of a poor match result, or the standard of officiating. Consumers of household products have a huge range to choose from and will readily switch brands for reasons of price or quality,where as sporting competitions are hard to substitute. For e.g. A Mumbai Indians tea m fan will never cheer for any other team even if his team is losing. This advantage is also a negative, as sporting tea ms that wish to expand market share find it difficult to attract new fans from other sides due to their familiarity with the customs and traditions of their existing sport team.Sport creates unique behaviours in people, such as imitating their sporting heroes in play, wearing the uniform of their favorite player, or purchasing the products that celebrity sports people endorse. The identification with the skills, abilities, and lifestyles of sports people can beused by sport manage rs and allied industries to influence the purchasing decisions of individuals who follow various sports. 5) HIGH LEVEL OF POSITIVENESS: Sport fans also exhibit a high degree of optimism, at times insisting that their team, despite a string of bad losses, is only a week, game or lucky breakaway from winning the next championship. The owners or managers of sport franchises exhibit a high degree of optimism by selecting their star recruits or new coach as the path to delivering them on-field success. Sporting organizations are relatively hesitant to adopt new technologies unless they are related to sports science, where on-field performance improve me nts are possible. In this regard sport organizations can be consideredconservative, and tied to traditions and behaviors more than other organizations. 6) LIMITED AVAILABILITY: The final unique aspect of sport is its limited availability. In other industries, organizations can increase production to meet demand, but in sport,clubs are limited by season length and the number of scheduled games. This constrains their ability to maximize revenue through ticket sales and associated income. The implication for sport managers is that they must understand the nature of their business, the level of demand for their product and services(whatever form that may take) and the appropriate time to deliver them. Considering this aspect, sports managers are required to discover alternatives for generating good income to run their respective sport organizations efficiently. THREESECTORS IN SPORT: In order to make sense of the ma ny organizations that are involved in sport management, and how these organizations may form partnerships, influence each other‘soperations and conduct business, it is useful to see sport as comprising three distinct sectors. Government Organizations, Non-Profit Sport Organizations, and Professional sports are the three distinct sectors which operate in alliance with each other in the sports industry. They are defined as follows: 1) GOVERNMENT ORGANIZATIONS: These organizations include national, state/provincial, regional and local governments, and specialist agencies that develop sport policy, provide funding to other sectors,and support specialist roles such as elite athlete developme nt or drug control. 2) NON-PROFIT SPORTORGANIZATIONS: The second is the nonprofit or voluntary organizations, made up of community based clubs, governing associations and international sport organizations that provide competition and participation opportunities, regulate and manage sporting codes, and organize major championship events. As the name suggests these organizations do not work for ma king money or profit. 3) PROFESSIONAL SPORT: The third sector is professional or commercial sport organizations, comprising professional leagues and their member teams (e.g. the Indian Premier League, IPL), as well as allied organizations such as sporting apparel and equipment manufacturers, media companies, ma jor stadia operators and event ma nagers. These three sectors do not operate in isolation, and in many cases there is significant overlap. For example, the State government is intimately involved in providing funding to nonprofit sport organizations for sport development and elite athlete programs, and in return nonprofit sport organizations provide the general community with sporting opportunities and as well as developing athletes, coaches, officials and administrators to sustain sporting participation. The State government is also involved in commercial sport, supporting the building of ma jor stadia and other sporting venues to provide spaces for professional sport to be played, providing a regulatory and legal framework for professional sport to take place and supporting manufacturing and event organizations to do business. The nonprofit sport sector supports professional sport by providing playing talent for leagues, as well as developing the coaches, officials and administrators to facilitate elite competitions. Indeed, in some cases the sport league itself will consist of member teams which are technically nonprofit entities, even though they support a pool of professional managers and players. In return, the professional sport sector markets sport for spectators and participants and in some cases provides substantia lfunds from TV broadcast rights revenue. SIGNIFICANCE OF THE THREE SECTORS IN SPORT The delivery of sport goods and services can be understood as being supplied through three key sectors: the private, public and the voluntary sectors (which can also be termed the non-for-profit sector). Each of these sectors is briefly elaborated on in terms of what they are and why they exist below. The commercial or private sectors are a huge part of the sport industry whose prime focus is profit. This sector includes football clubs, TV channels, fitness centers, stadium operators and the growing numb er of tour operators, who are tapping into a vibrant sport tourism sector. It the early development of sport in the UK was often lead by the voluntary sector, in the past 20  years it has been the commercial sport sector, often dominated sport sector, often dominated by large global business such as Nike, which have perhaps been one of the most dynamic parts of the sport industry. The public sector relates to governments involvement in sport. In the UK, government is essentially divided between the central government, based in London, and local government, based at city, town and county levels. Governments are primarily involved with sport: Via regulation, such as laws passed governing stadium regulation, or outdoor activity centers; As a facilitator, such as giving money to sport organizations or agencies, such as Olympic associations, which in turn give it to various sporting projects; Or as a direct provider of sport services, which is done by local government providing a variety or leisure facilities. Central government does not directly provide sport services. One of the reasons that governments intervene is the sport market place is market failure, a concept which is drawn from the discipline of economics. While commercial organizations can provide sport services profitably for some of the people, it is not financially attractive for them to provide them for everyone, so the market is said to fail. Yet, as has already been discussed, sport has many benefits and so can be dee med as a merit good or service: the more people who participate in it, the greater the benefits for the society as a whole. Services offered often operate at a loss, but because they achieve social objectives, as they are subsidized by government. The voluntary sector is a vital component in the sport industry, ranging from small groups of people coming together to organize their own sport club, to large organizations, which employ paid staff to run the organization, such as the international OlympicCommittee (IOC). The idea of a voluntary organization employing paid people can be confusing; it may be temptingto place such an organization in the commercial sector. Simply put, what differentiates such organizations fromcommercial ones is the focus of their work, which may relate to programs which have a social objective, rather being run for profit; also the governing trustees or governors give their time to help run the organization on a voluntary basis, rather than because they are paid. This as this can overlap with many government-related organizations and activities, the preference here is to use the term ‗voluntary sec tor‘ as this helps to maintain a sharper differenc e between the sectors. One of the reasons why the voluntary sector emerges is that, just as governments are forced to intervene because of market failures, so too can governments fail to deliver key services. These market and government failures leave a gap that is often filled by the voluntary sector, such as the numerous charities which develop tohelp meet different needs and funding gaps. RECENT TRENDS IN THE THREE SECTORS This three-sector model of the sport industry supply of sport goods and services is becoming more complex because the distinctions between the sectors are becoming more unclear; a development which can be described as the collapsing of the sectors. The factors which have driven this collapse can be summarized as: The sectors operating in similar ways; The growth in the three sector partnerships; Contracting out and partnerships; New notions of viability. Each of these areas is elaborated on further below. SECTORS OPERATING IN SIMILAR WAYS The public and voluntary sectors, in order to justify or secure funding, have torun themselves in a more business-like manner. While they may not be concerned with profit, they still need to appear professional and ensure that they are as efficient (ensuring the maximum output, such as sport programs or products, in relation to a given input, such as staffing) and effective with resources (this primarily focuses just on the quality of outputs and is def ined as ‗the right oppo rtunities, at the right time, In the right place‘). The private sector is not immune to this trend: they increasingly have to adopt many social objectives and consider issues of ethics, such as sustainability. THE GROWTH IN THE THREE SECTOR PARTNERSHIPS: - For both large and small scale projects, partnerships are often a key factor in their success. This can range from sponsorship deals, to fundraising activities, to capital project developments. The London 2012 Olympics is an interesting example illustrating the importance of partnerships. While central government has been a key catalyst and facilitator in the initial bidding and staging of the games, it also needs to secure millions of pounds of private money, much of it through sponsorship. In addition, in terms of staging the Olympics, thousands of volunteers will be needed, with the recruit me nt process needing to comply with proper employment practices and offering job training which will begin two years before the actual event. CONTRACTING OUT AND PRIVATIZATION: - One of the ways to bring the disciplines of the market place to the public sector, was to contract out public services to commercial operators, in a process known a s compulsory competitive tendering (CCT) which is not the same as privatization as this involves selling off the actual physical assets such as the sport centre, instead while the local authority would still own the physical sport facilities, the management and day –to- day running of the centre would be managed by an outside agency or organization. This contracting out process initially began with cleaning, catering and refuse collection services, but was extended to local authority leisure services in 1989 in the UK. The immediate question which may be raised is why would a private company want to manage a leisure facility which would operate at a loss? The key is to understand that what companies bid on was the size of the subsidy they would ask for from the local government. With this subsidy, plus the revenue the company generated and any additional saving made, they could then calculate whether they would make a profit  or loss. The hope was that this process would make services more efficient and reduce costs. As companies would be more concerned about offering services that people wanted and cut down on any unnecessary waste. In fact, many argued that it just made services more economic (reducing the cost of the inputs, such as staffing but which meant there was a decline in the quality of the outputs such as sport programmers) with many social objectives sacrificed. Now a day‘s more impetus is given for sport facilities to be managed by charitable trusts rather than private companies, and in theory allowsfor greater focus on non-profit social objectives. THE NOTION OF VIABILITY: These trends mean that it is useful to utilize concepts of organizational viability which goes beyond a simple notion of profit. While for the commercial sector the idea of the bottom line is vital for their future viability as an enterprise for many other sport organizations what ensures viability is more complex. It should be appreciated that many of the benefits of sport highlighted earlier are not necessarily profitable activities and can cost a great deal of money. An economist would call many of these spine -off effects externalities, which can be either good (such as improvements in health) or bad (a sport injury). Many of these benefits can be defined in terms of social objectives, such as reducing crime or improving health, and provide a key rational for may sport organizations, existence. For sport organizations operating in the public and voluntary sector, what ensures their viability relates to providing evidence that they are achieving some of the less real social objectives, which can help secure their future funding.