PORTUGUESE FOOTBALL: MANAGING TO COMPETE

Luis Filipe Simão

Dissertation submitted as a partial requirement for the conferral of

Master of Science in International Management

Supervisor:
Prof. Dr. António da Silva Robalo, ISCTE Business School, Department of
Marketing, Operation and Management
October 2017

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 Portuguese Football: Managing to Compete

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 Portuguese Football: Managing to Compete

PORTUGUESE FOOTBALL: MANAGING TO COMPETE

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 Portuguese Football: Managing to Compete

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Abstract
Football Industry has changed a lot during the last decades and turned into more than just
sports or entertaining, into a more complex management challenge. It is now influenced
by and influences international environment and organizations, as there is an increasing
number of followers and money generation associated with this Sport.

For all the complexity and diversity that can be found in the Football business, which
cannot be studied all at once, this dissertation’s focus was to find out how competitive the
Portuguese Football Clubs are between each other. Although the findings haven’t been
compared to other football leagues, it is a starting point to further compare with other
international leagues.

Keywords: Football, Sports Management, Club, Competition, Premier League.

J.E.L: M29; Z29

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 Portuguese Football: Managing to Compete

Resumo
A Indústria do Futebol mudou completamente durante as últimas décadas,
transformando-se em algo mais do que um Desporto ou entretenimento, transformando-
se num maior desafio de gestão. Como tal, é agora influenciado e influenciador do
ambiente em redor e de organizações, com crescente influência devido ao constante
aumento de seguidores e movimentação de dinheiro associadas a este desporto.

Dada a complexidade existente na Indústria do Futebol, que não é possível cobrir de uma
só vez, optou-se, através desta Dissertação, em focar-se no Futebol Português e no quão
competitivo serão os seus clubes de futebol entre si. De referir que, apesar de não existir,
neste estudo, uma comparação direta com clubes de outras ligas, trata-se de um bom ponto
de partida para o fazer e procurar perceber mais sobre os clubes de futebol portugueses.

Palavras-chave: Futebol, Gestão Desportiva, Clube, Competição, Primeira Liga.

J.E.L: M29; Z29

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Table of Contents

2. Theoretical Framework: Football Industry ........................................................................ 11

2.1 Football Industry Structure ........................................................................................... 11
2.2 Football, Clubs and Players - An overview of the world of football ........................... 13
2.3 Evolution and Context of Football Industry ................................................................. 14
2.4 Panorama of Football Industry in Portugal.................................................................. 17
2.5 The Football Industry as a Prospective Management ................................................. 20
2.5.1 Main Forms Of Performance Monitoring.............................................................. 22
2.6 The Process of Change in Club Management ............................................................... 25
2.7 Relations Between Economic Variables And The Performance Of Football Teams 27
2.8 Performance Evaluation of Tangible and Intangible Aspects of the Football Field . 30
3. Problem Statement ................................................................................................................ 32
3.1 Research Paradigm ......................................................................................................... 32
3.2 Research Objectives ........................................................................................................ 32
3.3 Research Questions ......................................................................................................... 33
4. Data......................................................................................................................................... 34
4.1 Research Design .............................................................................................................. 34
4.2 Population Definition ...................................................................................................... 34
4.3 Sampling Method ............................................................................................................ 34
4.4 Data Collection and Procedures..................................................................................... 35
4.4.1 Data Collection ......................................................................................................... 35
4.4.2 Data Preparation: Variables ................................................................................... 36
5. Analysis Of Collected Data ................................................................................................... 38
5.1 Descriptive Summary...................................................................................................... 38
5.2 Findings ............................................................................................................................ 40
6. Conclusion.............................................................................................................................. 44
6.1 Conclusions ...................................................................................................................... 44
6.2 Limitations of the research ............................................................................................. 47
6.3 Suggestions for further studies....................................................................................... 47
References .................................................................................................................................. 49

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List of Abbreviations
FFP – Financial Fair Play Regulations
FIFA – International Federation of Football Association
FPF – Portuguese Football Federation
GDP – Gross Domestic Product
HR – Human Resources
TV – Television
UEFA – Union European Federation Association

Figures index
Figure 1 – Four Functions of Management .................................................................... 21
Figure 2 – Four Performance Variables ......................................................................... 23
Figure 3 - Performance Measurement Perspectives ....................................................... 24

Table’s index
Table 1 - Descriptive statistics of clubs .......................................................................... 38
Table 2 - Descriptive statistics of players ....................................................................... 38
Table 3 - Descriptive statistics of sports’ performance .................................................. 39
Table 4 - Descriptive statistics of stadium attendance ................................................... 39
Table 5 - Descriptive statistics of club's income (in euros) ............................................ 40
Table 6 - Descriptive statistics of club's expenses (in euros) ......................................... 40
Table 7 - Correlation between sports performance and attendance with financial
performance (income variables) ..................................................................................... 42
Table 8 - Correlation between sports performance and attendance with financial
performance (expense variables) .................................................................................... 43

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1. Introduction

The world is in a constant change and adapting to new realities. Last decades, with the
development of technology, this changes are happening faster and globally. Therefore,
with all this changes happening around us, it is fair to say that, over time, it affects the
way we live.

Football, like almost any other matter, is no exception. Since its creation, the Sport has
changed a lot, not just on how it is played, but also in the way it is managed. Globalization
brought in new challenges and club’s management became more than managing people
to play the Sport and entertain people. It is now, more than ever, a business that generates
and moves considerable amounts of money and football clubs are now more alike to
corporate companies than they were before. It’s no longer a Sport just to entertain, but
also a Sport where clubs compete among them to have more income and profit, as well
as a good financial situation, making management decisions to be as relevant as the
performance of the players on the pitch.

Considering this, it is possible to say that Management in Football Industry is a lot more
complex now-a-days than what it was just 50 years ago. The high number of followers
make it have a great macro environmental impact over society and, as a consequence,
makes it very influencing over people’s life, especially in countries that have a strong
interest in it, as it is the case of our country – Portugal.

For all that’s been mentioned, there are a high number of variables related to Football that
could be explored, both in a macro point of view like the impact in society, corporate
responsibility, influences over a population’s life, among others, and in a micro point of
view like the change in the rules of the game, players mobility and so on. As it is not
possible to cover everything in just one study, this one will focus on the understanding of
the Portuguese Football Clubs and the existing competition among them in order to find
a relation between financial information of the clubs, team’s composition (in terms of
number of players and nationalities) and the club’s performance (rank and titles won).

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2. Theoretical Framework: Football Industry

2.1 Football Industry Structure

Football is one of the most popular collective sports in the world and a thriving business,
particularly in Europe (Gerrard, 2004), but also throughout the world, both in revenue
and spectators. Despite this growth, there are important issues that sports leagues have to
deal with in order to ensure its long term success. One of the key issues is the competitive
balance, which is reflected by the uncertainty of the results in sporting events (Michie and
Oughton, 2004). The excitement generated by the uncertainty of the outcome of the event
generates fan interest and therefore leads to increased demand for the service and sporting
events view (Rottenberg, 1956).

Due to the outstanding importance for professional team sports, competitive balance has
become an important topic of discussion among researchers in sports economics. A wide
variety of approaches have been introduced, each of which attempt to provide a better
quantification and more efficient competitive equilibrium. As Zimbalist (2002) notes,
"there are almost as many ways to measure competitive balance as there is to quantify the
money supply" (p. 112).

As in any economic process of professional team sports, the inputs (talent, training) are
combined with the capital (stadium) to produce benefits (Game) that is sold to customers
(ticket holders, viewers). Unlike other industries, the production of sports industry cannot
exist without a competitor.

Note that, the top teams are companies that are intrinsically concerned with matters of
economy and finance (Morrow, 2003). The field performance is inextricably linked to
financial measures, such as paying the players and the expenses of the clubs (Avgerinou,
Giakoumatos, Konstantinakos & Mountakis, 2006).

Since the birth of professional football, intermediaries have established transnational

networks in order to provide the best conditions for the mobility of players. Progressively,
these have become key figures in the football industry.

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 Portuguese Football: Managing to Compete

Aided by the legal reforms in the regulation of players' labor market, sports clubs
significantly increased their bargaining power, as well as an increase in higher revenues
of the clubs.

Since the scenario of transfers in winter 2011 through the implementation of the Transfer
Matching System (TMS), FIFA began collecting the first official data contained in
transfers of international players. In the first nine months of 2011, international transfers
of 7,854 players have been recorded for a total amount of US $ 1.734bn (TMS 2011).

Several studies have focused on the agents, focusing on the theoretical and legislative
aspects of this profession. For example, Holt et al. (2006) provide a description of the
activity of the agents of football through the game theory.

Siekmann et al. (2007) illustrate the different legal frameworks related to the activity of
sports agents in several states throughout the world. In 2009, a research project
commissioned by the European Commission examined the role of sports agents in the
European Union. This study provides a description of the legal, social and economic
contexts in which agents operate (KEA et al., 2009).

Measure the volume of football intermediary business is a difficult task. Indeed, it is usual
that the representatives' fees are never fully disclosed. Sometimes these payments can
also follow some illegal practices. In addition to the Football League in England, to our
knowledge, the English Premier League is the only league that clearly disclose the fees
paid by clubs to agents. In 2009/10, the total amount paid to agents was about £67m
(BBC, 2010) and this value has been increasing over time. In 2016/17, the amount paid
reached £220m (BBC, 2017).

Note that, the FIFA regulation, in its Article 3 states that the activities of football agents
can only be held by individuals (FIFA, 2008). Although this regulation does not prevent
licensed agents organize their activity in the form of a company. Since 2010, this is no
longer the case of France, with the entry of Law No. 2010-626 (Sports Code, 2011). Thus,
the new regulations on sports agents approved by the French government forbade them
to organize their activity in the form of a company. This decision was taken mainly for

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tax reasons, in order to be able to identify the representative of the players, who might
otherwise hide their identity behind a company.

In general, the agents can be classified as follows: autonomous agents with their own
business as a legal entity; autonomous agents without company as individuals; and agents
employed by the company.

As a result, in 2008, the new requirements set out in Article 4 have been placed on agents
to establish their own activity as business enterprises (FIGC, 2011). It specifies that the
licensed agents may operate through its companies only if authorized by the
players/customers when they sign the official mandate. Agents have to be major
shareholders of their companies and the number of shareholders that act as the company's
licensed agents is limited to a maximum of three.

Moreover, it is forbidden for companies of agents, sell their shares for any football bodies,
and vice versa, in order to avoid conflicts of interest. Finally, the company's legal
representative must be a licensed agent. Regarding the structure of agents of companies,
half of them have other shareholders in addition to the agent. Agencies often group
together a number of partners that can support the core business, bringing even more
experience in order to differentiate the services provided to customers, or to reach new
markets and activity sectors.

2.2 Football, Clubs and Players - An overview of the world of football

With such a high number of followers, the world of football has long been regarded as an
industry whose characteristics were more and more like an entertainment service. The
ranking of football as business activity has come to revive the economies of countries
where football is promoted as a national sport. Today, in most countries football is a large
percentage of GDP, because football events also drive a large number of other sectors,
such as communication, catering and transport.

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Thus, the globalization of the football industry has led to a high concentration of resources
in the hands of some European and South American clubs that had the economic resources
to face foreign competition and other entertainment companies (Nilsson, 2005).

Football has successfully triggered other team sports like hockey, basketball or handball,
and was accepted as the main sport that retains the most media attention and public
reception in the world (Horne & Manzenreiter, 2002). According to FIFA, there is a
sporting event to record 49.2 million people throughout the world in terms of viewers.

Most notions about business assumes that the company develops, produces and sells a
product to a consumer or buyer based on a mutually agreed price. Football evokes more
than a service, an experience and entertainment. It was transformed into a media event
for the benefit of millions of viewers, some of which are present at the event. The TV
recordings also serve as library records (Avgerinou, Giakoumatos, Konstantinakos &
Mountakis, 2006).

The mediated events affect to the own stadium or arena, which are enabled to transform
ordinary places in special locations. Currently the arena of the top clubs represent the
state of the art sports-leisure architecture, and that are associated with various businesses
such as VIP rooms, garden areas, food. Similarly, all kinds of products that are and can
be sold to football events such as flags, banners, scarves and hats and footballs are other
products that are in association with the events of the football and make it a business
(Avgerinou, Giakoumatos, Konstantinakos & Mountakis, 2006).

2.3 Evolution and Context of Football Industry

Considering what’s been said before, with all the events that occurred in the last three
decades, it is not surprising that football clubs turned into commercial companies which
encouraged some investors to take prominent positions in such undertakings.

The developments in the media sector allowed the clubs to negotiate more advantageous
broadcast rights. As an example, the creation of the Champions League during the season

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of 1992 and 1993 resulted in a competition that brought together several top clubs in
Europe. This organization organized by UEFA generated approximately EUR 610 million
in revenues in 2005/06. This amount was distributed to participants through competition
(Deloitte & Touche, 2007).

The analysis of the financial performance was considered only in accordance with the
total revenue obtained by the clubs, regardless of the competition in which it participates
(Haas et al., 2004).

Zuber, Yiu, Lambc and Gandar (2005) considered the participation of a club in European
competitions, which passed the first stage of the competition and reached the finals. The
clubs to reach the final stage, benefited from broadcast rights and income per day, and
other income.

Could it will thus be noted that the strong economic growth that the football industry has
seen since the late 1990s, attracted the attention of the scientific and academic community
to identify issues related to the performance of the management of football clubs.

Scientific studies until now, focused mainly on own performance and analysis of the
determinants of financial performance. According to Szymanski (1998) the performance
of a football club is reflected in two fields, the performance of the players and the strategic
actions undertaken by the clubs.

Performance determinants are essentially the issues related to the game itself, the
management of clubs guided by the market (Ozawa, Cross & Henderson, 2004), players
skills (Gerrard, 2005) and coaches (Dawson & Dobson, 2002), coaching change to
(Audas, Dobson & Goddard, 2002; Bruinshoofd & Weel, 2003; Hope, 2003), the market
size or base of support for the club (Buraimo, Forrest & Simmons, 2007), strategic actions
undertaken by the clubs (Heij, Vermeulen & Teunter, 2006).

The results of successful performance or sporting failure that the club has in national and
international competitions comes down to the ability to achieve victories, to win
competitions in which it participates as financial performance measures the value created
by the club for investors (Heij, Vermeulen & Teunter, 2006). According to those authors,
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any company that aims to survive and thrive over time is dependent on its ability to
generate funds to reward factors of production. However, the football industry gives
shareholders the ability to be linked to sporting performance.

Some current theoretical derivations were developed based on profit theory. Gerard
(2005) developed a model of using resources for technical analysis of the efficiency and
demonstrated that the clubs that seek to reconcile the sporty performance with the
financial expense. This premise is also present in one preposition of Unified Theory of
Capital and Labor Markets in Major League Baseball (Vrooman, 1997).

Note also the study of Dobson and Godbard (2004) has identified that the English clubs
in a context of financial constraints, seek to maximize revenue and victories with the
maximization of profit. In the same line of research Gerrard and Dobson (2000) and
Morrow (1999) argue that in order to maximize sports performance to a profit, minimum
level has to be achieved, together with maintaining the financial solvency of the club.

In addition to the theoretical developments in the literature, one can find some empirical
studies examining the relationship between sport and financial development. One of the
first studies conducted on this subject was made by Arnold (1991) that, through the OLS
model, found that the level of revenue for English clubs was strongly associated with
sports performance during the period 1905-1985.

Later, Szymanski (1998) examined the relationship between sports results and profit
before tax of 40 English clubs for over 20 years. The results showed that in only 54% of
cases, improved performance in sports reflected in an increase in profits of clubs. Even
though the only variables considered were the revenues and salaries, there is a positive
relationship between these two variables and sports performance.

Similarly, Szymanski (1998) and Szymanski and Kuypers (1999) describe two general
principles on performance in football, the best performance leads to increased revenues
and the increase in wage costs leads to better performance of the football league.

The study on the relationship between performance and revenues due to Dobson and
Goddart (1998), which analyzed a sample of 77 clubs that have maintained their signature
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in the league for 48 years, which shows a relationship between revenue and sports
performance.

Despite these assumptions, Barajas et al. (2007) analyzed, using the OLS model, the effect
of sports performance in revenues and net profits of Spanish clubs participating in the
league between 1998 and 2002. In the first case, there was a correlation between 66.8%
and 88.5% and in the second case, only 14.1%. These results demonstrated that to obtain
more revenue, the players have to have more talent and greater sports performance.

Thus, it is concluded that the direction of causality in the financial performance precedes
sports performance is a sport theory of prophecy.

2.4 Panorama of Football Industry in Portugal

Regional development has a strong exogenous influence through linkages of the various
economic activities and on society itself. According to Mourão (2010) the sports like
football to be quite ambitious and powerful, need a set of infrastructure and support that
can sustain their activity. Such infrastructure may only be found in places with strong
development rates.

In the case of Portuguese football, it may also be noted that reflects this reality, such as
Benfica, Porto and Sporting representing the top teams of the league and fall of the two
most developed regions of the country (Mourão, 2005).

Football as a spectacle needs spectators, and they may be in large numbers and on a
regular basis. Similarly, there aren’t clubs if there are no players and in sparsely populated
areas there is less likely to form a football club. The following chart shows the number of
people in Portugal who practice a sport.

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Attends is thus an expansion of football which has become a real spectacle, with clubs
increasingly grown into corporate molds and thus allowing further development of
relations with other potential investors. Portugal is considered a small country, it is argued
that population levels are not consistent with the number of football clubs.

Over the years, social changes that have occurred in football clubs and their environment.
These changes promoted a new way of understanding football. Thus, in addition to being
considered an activity and national element has to be explained in order to generate profits
at the economic level (Santos and Greuel, 2010). As consequence of this changes there is
a need for a more professional management of football clubs, in order to achieve a
positive financial record. Nevertheless, managers of football clubs face several
challenges, as the speed of transmission, information and its quality is fast and have a
direct effect over the decisions made (Santos e Greuel, 2010).

After 80 years, the football industry has evolved significantly in their finances and profits.
It is the international body FIFA that most stimulates this economic evolution of football
clubs and that legislates the rules (Cross, 2005).

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In our country, the most illustrative example are the teams that play the championships
organized by the District Football Associations, which have an average lower cost than
leading football clubs, but usually also lower revenue. Nevertheless, competitions are
organized in a way that allows multiple clubs from the same country to participate in
different competitions and, with that, being able to benefit from that, making the gap
between stronger clubs lower than it would if only one could take the opportunities.

In this context, it is pertinent to the analysis of the amount of fans the club has and what
the return of a game in terms of audience, the demographic expansion of the fans and
what the intensity of devotion to the club (Lopes, 2009).

Professional football in Portugal is organized in various competitions that take different

degrees of importance in this mode (Federação Portuguesa de Futebol, 2017):

• Portuguese League of Professional Football

• Portugal Cup

• Super Cup

• League Cup

When sports performance has impact on stock prices of a football club, Boido & Fasano
(2007) distinguish two different transmission channels. According to the authors, there is
the emotional channel, where the investor’s sentiment plays an important role in
determining some investment decisions. It should be noted that some emotional factors
play a key role in defining financial market prices (Stracca, 2004).

In this aspect, Falter, Perignon & Vercruysse (2008) concluded that consumer choices are
often influenced by the sports performance, this is because, in the event that a negative
result will be a negative reaction in consumer demand. According to the authors, the
experiences that are based on the most important sporting events in the world as the World
Cup. The teams’ trophy of achievement represents a period of great joy for the winning
country, which makes consumers look more often a particular good or service, that is,
there is a positive behavior.

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Consequently, success in the field can lead to higher advertising revenue, increased sales
of merchandising products and increased brand awareness, which as a result leads to a
greater ability to create value for investors.

Are the sports results that influence the investors' state of mind causing human reactions
that lead to feelings of optimism or pessimism (Edmans, Garcia, & Norli, 2007).
Consequently, the effect on the investor’s psychological behavior leads to the purchase
or sale of shares in sports undertakings (Samagaio, Couto & Caiado, 2009).

According to Bell, Brooks, Matthews & Sutcliffe (2011), football results can affect stock
prices through humor, confidence and emotional state of investors. For example, after a
victory, fans can become more optimistic, more confident in their abilities, and less risk
averse, making them more willing to buy stock risk, with adverse effects after a loss
(Kaplanski & Levy , 2010). Markman & Hirt (2002), report that football fans predict that
their team will win, and that it is possible to find a greater reaction in the share price after
the defeats rather than after the victories. Duke & Ferreira (2008) concluded that there is
a moderate correlation between stock returns and the sporting and financial performance
of the club.

2.5 The Football Industry as a Prospective Management

Considering the evolution of the Football Industry and the changes mentioned before, it’s
natural to think that managing Football Clubs has also changed over the last decades. But
what is management? Management control is a term first introduced by Anthony (1965)
defined as the process to ensure effectively and efficiently the organization's resources
towards the achievement of the objectives and aims. More recently, Kloot (1997)
cautioned that management control exists in organizations in order to ensure the
achievement of objectives.

It should be noted classical definition of Barnard (1938), by which an organization is a

system of two or more persons consciously coordinating activities. In this context, the
coordination of these activities is carried out continuously and expliciting purposes

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(Rosanas, 1994). Thus, according to Rosanas (1994, p.223) measure the achievement of
objectives of the organization can change the top management behavior. And this change
of people's performance is the reason for the system, for example, the goal is to guide the
performance of the members of the organization, according to the actual data available.

Following this thought, it is stated that the management has four essential functions:

Planning: creating a detailed action plan aimed at some

organizational goal.

Organizing: determine how to distribute resources and

organize employees according to the plan.

Leading: communicating, motivating, inspiring, and

encouraging employees towards a higher level of
productivity.

Controlling: monitorization of activities, people and

evaluation of results against the goals.

Figure 1 – Four Functions of Management

Source: Adaptation from Rosanas, 1994

Most authors cautioned that management control is a process used subjectively, by

managers in order to influence the performance and behavior of their employees
(Tannenbaum, 1967; Collins, 1982; Flamholtz, 1983; Inzerilli and Rosen, 1983; Amat,
1992; Fisher, 1995), and put into practice the strategic organization, in order to achieve
the objectives and targets proposed (Anthony, 1990; Collins, 1982), both effectively and
efficiently (and Anthony Dearden, 1976).

It is a process that requires the establishment of rules governing the behavior of

employees, measures the quality and evaluates and corrects the deviance (Henderson and
Lee, 1992; Coates et al, 1993). According to Kloot (1997) the majority of management
control systems are considered as models of closed and cybernetic cycle. Cybernetic

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control systems are models in which the objectives are properly set, the outputs are
measurable.

On the overall level of organization, it can be assumed that top managers are interested
in whether the organizational goals and pass this interest to all employees and employees
(Rosanas, 1994). For the management control process to be successful, they must take
into account the environmental characteristics (Collins, 1982). The same means to say
that self-regulation of the company's management system solves the strategic problems
in relation to the environment and the operational problems (Soldevila, 2000). Thus, the
process management control should be considered from two dimensions, a social
dimension and organizational dimension. The social dimension has the determinants of
society to which it belongs and the organizational dimension is related to the expansion
of the company, the development of productive factors and market (Neimark and Tinker,
1986).

The challenges of the Football Industry as it is now, with Clubs having a corporate
dimension, the four functions of management provide a strong tool for the management
of Football Clubs, where preparation of a football season takes place before the official
start, not just with the preparation of the teams and the players, but also with the planning,
organization, leading and controlling of the Clubs assets, investments and perspectives.

2.5.1 Main Forms Of Performance Monitoring

In recent decades there have been many academic papers that were focused on
performance measurement in companies. According to Almazan, Rosas Garcia Cazares
& Chavez (2009) performance is defined as the relevant shares used in order to achieve
the organization's goals that can be measured in terms of contribution to company goals.
Thus, the positive performance is the performance of management procedures with
quality attributes that relate to profitability, efficiency, productivity and effectiveness
(Almazan, Rosas Garcia Cazares & Chávez, 2009).

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According to Mitchell (2002) organizational performance measure should be made, based

on four variables:

Performance
variables

Knowing the relevance Efficiency: evaluate how

Effectiveness: evaluate if
level of the company for HR, physical resources and
the level of success may Know financial viability.
their clients and financial information are
achieve strategic goals.
employees. being used.

Figure 2 – Four Performance Variables

(Source: Adaptation from Mitchell, 2002)

Once again, this performance variables can be applied to Football Clubs, reinforcing the
idea of how corporative they became.

The performance measurement system is defined as the integrated set of individual

indicators that are intended to quantify the efficiency and effectiveness as well as the
production of information on the performance of the activities and business processes
(Montenegro, 2004; Neely & Platts, 2005).

Thus, performance measurement is the activity where it is determined the level of

performance, which is important for the improvement, adjustment or regulation of a
specific activity. Most of the performance measurement systems that are developed in the
companies were created based on the set of practices that have been implemented in
several attempts to improve the performance of employees (Folan & Browne, 2005).

The last few years have witnessed an increased interest in the role of performance
measurement strategic systems essentially in helping managers to create strategic

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competition. According to Kaplan and Norton (1996) it is important to consider four

different perspectives where companies are linked together, that is, financial perspective,
customer perspective, perspective of internal processes, the prospect of learning and
innovation. The following diagram shows these four performance measurement
perspectives.

Figure 3 – Four Performance Measurement Perspectives

Likewise, a sporting organization has the same structure as other organizations, as they
are formed by people, in a controlled and organized manner, working for the same
objective, although through a different management. We therefore classify the sports
manager as a profession inserted in the sports world with training and qualifications for
the development of the function. Therefore, the sports manager must know deeply the
mission and objectives, history, culture and values, and personally participate in the
process with dedication (Soucie, 2002).

As suggested by Cross & Henderson (2003), football clubs have in recent decades past to
provide in addition to leisure activities, business organizations and consequently

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witnessed a change in strategic leading European clubs. According to Aleemullah (2012)

the concept of sporting success has covered skills to win trophies in the field and a way
to create value. As a result of financial fair play, most clubs face the challenge of carrying
out certain short-term strategies that are based on essentially the search for financial
success (Aleemullah, 2012).

The analysis of the sports and financial performance becomes important when one wants
to study what the strategic objectives to be achieved by the managers of football clubs
(Kesenne, 2007), which take the teams to maximizing their profit. Teams must be seen as
a utility maximizers in the pursuit of profit targets, subject to certain financial restrictions.

Based on observations of 5 seasons, Barros and Leach (2006) concluded that clubs more
revenue and more efficient in most cases are well-executed. The scale effect is a key
factor to explain the different levels of competition between the clubs. Haas (2003), and
Haas et al. (2004) found that only between ¼ to ⅓, respectively, English and German
clubs were efficient (depends on the technique used to DEA).

2.6 The Process of Change in Club Management

According to Drucker (2001) management is necessary for all human endeavors that
integrate into one organization, people who have different skills and knowledge and,
therefore, it is transversal to all organizations. Currently, before strong financial
constraints arises different challenges to sports clubs, in relation to their efficiency, to
accomplish its objectives, sports clubs must meet a set of available resources and adapt
its financial structure to achieve acceptable levels of efficiency that can ensure their
sustainability (Guzman, 2006). It is particularly important to adopt management models
that ensure the development satisfaction present needs without compromising the ability
of future generations.

According to Wicker & Breuer (2011) sports clubs form the base of the pyramid of the
sports system and are characterized by being financed through grants and contributions
of members and by setting goals that meet the expectations and interests of these

25
 Portuguese Football: Managing to Compete

(Heinemann & Puig, 1996; Robinson & Palmer, 2010). Thus, as a result, clubs must be
financially stable and described as associations whose members ambitious for the
achievement of common goals (Wicker, Breuer & Hennigs, 2012). Are aspects of such
the capture of human resources, financial capacity and management infrastructure that
represent the main challenges of sports clubs, and require them to evolve towards greater
acquisition of greater organizational capacity (Wicker & Breuer, 2011).

People and processes are the main focus of change management, which includes activities
such as development of innovative forms of measurement, motivation and performance.
Change management includes the analysis and definition of all the changes that the
organization needs to face and also the development of activities that allow the reduction
of risk and cost to maximize the return (Wicker, Breuer & Hennigs, 2012). From this
perspective, innovation is seen as the process of change, enabling the understanding that
all states organizational change, by creating new rules and values. According to Cowling
Mailer (1998), "does not study the change itself, but mainly its effects and all processes
associated with it" (1998, p.334).

The current reality in sports organizations reflect a state of successive endless changes
and present daily in all their aspects, bearing in mind that the causes and consequences of
the change process are interlinked (Meyers, 2009). But the current organizational
environment requires progress that can somehow question the "ways of doing and
organizing" organizational activities, (Guzman, 2006). Progress those who go to seek
sources and improvement of roads, using experiences of new organizational solutions.
According to Myers, (2009) the frequent changes in the last decades of the century, both
the socio-cultural level, such as economic and technological level organizations, mean
that greater flexibility is required, associated with greater organizational creativity, which
main aim is to conduct to rapid and effective adaptation strategies. Also important was
the intensification of competition at various levels with the emergence of new forms of
competitiveness in the context of a globalized economy, where it is faced with new market
requirements that have increasingly dynamics and instability, with organizations coming
across new forms of consumption, behavior changes, attitudes and expectations, (Garcia-
Sanchez et al., 2007). Among all these competitive factors, Human Resources
undoubtedly represent a basic factor of competitiveness, integrating HR in work

26
 Portuguese Football: Managing to Compete

organization, being defined as a set of policies and practices of the own organization
(Esteve et al., 2011).

The management of human resources is one of the factors to which the author Peter
Drucker (1994) refers to as having an important role in the reorganization of the company,
as the new technologies play a key role in competitiveness. Thus, the author argues in his
theories that the way organizations manage the new technologies of information and
communication will make the difference between those who win and those who lose.
Having this into consideration, it’s possible to say that factors such as creativity, speed
and competitiveness are key points of organizational success (Drucker, 1994; Esteves et
al, 2011.).

Relating this with the previous information, where there is the idea of Football Clubs as
big corporate entities that provide more than entertainment, it is noticeable that Football
has a strong relation to people. People make the sport, weather it is inside, as an employee
of the Club, or outside, as a supporter or even a business partner. For all these reasons,
Football Clubs have now a close link to people and to human resources.

2.7 Relations Between Economic Variables And The Performance Of Football

Teams

For all that’s been stated, it’s clear that professional football has become a multimillion
dollar industry. To some extent, due to all the globalization of the sport, it seems that it
has lost much of its local charm and many of its inherent geographical features. However,
the location also appears to play an important role in modern football. In fact, the
geographical basis of this sport is widely apparent in a variety of geographical scales:
global, national and local, as is shown by international competition among countries,
professional team’s patterns, and the ratio of fans to the teams and locations of games.

Generally, there is a very strong link between a football team and the city where it is
located. However, professional football teams in Europe are not formally local
monopolies with a large state of permanent league, because poor performance in the field

27
 Portuguese Football: Managing to Compete

brings bad position, while the good performance allows teams to compete in international
championships. Given these considerations, a city can host zero, one or more successful
football teams. Obviously, competitiveness and international football success differ
markedly between European cities (Heuer et al., 2011)

There is a vast literature on the question of whether professional sports help local
economies to develop. The literature that specifically address the determinants of success
in international football is based on the success of national teams of models. These studies
consider countries as units of analysis and, in general, focus on testing the influence of
social, demographic, economic factors, and cultural and geographical factors on the
performance of national teams (Magnussen & Storm, 2005).

Most scientific studies on football, consider that the population and per capita income in
the cities where the games are held, as two main significant long-term determinants. Some
authors determine the hypothesis that income is an important explanatory variable of
football consumption. Thus, the most common variables are the population and GDP per
capita. Given the size of the people who watch football games, it is pertinent to analyze
the role played by the market, local economic environment as determinants of success
(Dejongue, 2004).

There is broad consensus in the literature on the relationship between demographic and
economic variables identification, which is an international football success explanation.
Thus, these studies identify that the success of football increases with population and
income. More specifically, the football performance of a country and its per capita income
follows a quadratic relationship. The population is used for the potential needs of the
market. From a theoretical point of view, it is emphasized that the most populous cities
offer a greater potential for domestic market for their teams. GDP a second variable,
which can be included in the model as a potential need for the domestic market. However,
it can be said that GDP is not suitable since it can be polarized by a scale effect. This
means that geographical areas characterized by a large population are likely to have a
higher GDP simply because of their size.

In addition to determining the demand side, the spatial distribution of the economy, the
activity is also driven by production costs reflected in the conditions of the labor market,
28
 Portuguese Football: Managing to Compete

such as wages and unemployment. Theoretically, for most football teams this reasoning
is not valid, because football markets are clearly targeted because of the strong preference
of the fans. So, turning to small geographic unit of analysis, market demand for motives
may be at work as well. Furthermore, the literature on the spatial distribution of economic
activity also mentions that the agglomeration economies may be relevant for the
manufacturing companies.

There are other non-economic factors influencing football teams. For example, there is a
strong relationship between football and culture so that cultural influences may contribute
to promoting the international success of football in a team / city. To give an example,
the popularity of football as a spectator sport depends on specific cultural factors
underlying a particular city. Other variables that can potentially affect cities and their
relative performance, could be the environment (weather) geographical, preferences for
other sports, institutional factors.

It is often said that viewers and fans can serve as the twelfth of a soccer ball when the
team has an extra important match to play. A packed stadium can lift the team so they can
win the match (Solberg & Haugen, 2010).

Most of the research have shown that people identify with winning sports teams (Cialdini
et al, 1976; Cialdini & Richardson, 1980; End of 2001; Joinson, 2000; Wann &
Branscombe, 1990).

End, Dietz-Uhler, Harrick and Jacquemotte (2002) identified that there is a positive
relationship between preference and the percentage of team wins. These results suggest
that the preference of the team is concerned with the identification of performance.

Some previous studies have evaluated the performance in sport through different
approaches. Some studies have analyzed the specific efficiency of players (Torgler and
Schmidt, 2007), while others measure the efficiency makers taking into account the
characteristics of the team (Fizel and D'Itri, 1997 to Dawson et al., 2000), as well as
analysis of sports performance teams in competition involving (Carmichael et al 2000;
Barros et al .. 2008). Barros and García del Barrio (2008) consider the financial and
sporting objectives in order to measure performance.
29
 Portuguese Football: Managing to Compete

The performance of a football team can be studied through the analysis of its results in
the field, and it is these results which represent the most important role in the management
of a club, more than financial results (Bosca et al., 2006).

The production process can be related to the fact that the football teams reaching their
maximum level of sports performance in various competitions in which they participate,
making use of available resources. That is, the planning of the manager and the quality of
the players will have a vital effect on the results.

2.8 Performance Evaluation of Tangible and Intangible Aspects of the Football Field

Intangible aspects are considered as intellectual capital, and are increasingly becoming a
competitive advantage for organizations, especially the sports organizations. The use of
these assets give rise to doubts consistent with the accounting.

The football club activities could be divided into three main categories: first generation,
income through ticket sales, broadcast rights, match day services and sponsorship.
Second, the contract negotiation of the players, and thirdly, develop and improve the
talent (Szymanski and Kuypers, 1997).

An asset can be either tangible (machinery, equipment, etc.) or intangible. Intangible

assets represent a broad concept - which could be, for example scientific or technical
knowledge, licenses, trademarks or intellectual capital (IASB, 2012). IAS 38 is a
framework that deals with various issues of intangibles, in order to prescribe the
accounting and treatments for these. In order to determine whether an asset is tangible or
intangible several criteria must be considered. Tangible assets are treated in accordance
with IAS 16, as the fixed equipment (IASB, 2012).

Usually the cost of an intangible asset acquired can be measured through trust, especially
when there is a charge in the form of cash or other monetary assets (IASB, 2012). The
cost has its purchase price and the active preparation costs for the use (IASB, 2012).
Nevertheless, to identify when the asset will generate future economic benefits is difficult.

30
 Portuguese Football: Managing to Compete

The main objective of Financial Fair Play Regulations is to improve the economic
capacity and increase transparency and credibility (UEFA, 2012). FFP has various rules
and regulations, of which two are of great importance: (i) the requirement for balance
specified in Article 58-63 and (ii) the reinforced rules on accounts payable in arrears (art.
65-66).

Note that some clubs beyond the recruitment and training of its players in order to
complement the strategy of the club, opted for investment in creating their own structures.

The market of the current football is important to promote competitiveness to increase

revenues, unlike other markets (Szymansky, 2001). Participation in their National Major
Leagues of Professional Football and UEFA competitions associated with an
improvement in quality and competitiveness of competitions in which clubs participate,
contribute to an increase in revenue. These funds can be used for the improvement of
working conditions as well as the acquisition and player retention.

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 Portuguese Football: Managing to Compete

3. Problem Statement

3.1 Research Paradigm

As mentioned before, the purpose of this work is to gain a deep understanding about the
competitiveness of the Portuguese Football Clubs, by analyzing inputs and outputs of
their performance, both on the pitch (outcome of the matches played, that is, victories and
losses) and outside the pitch, on a management level (income, costs, players, etc.).

The reason why it is important to analyze beyond match results, that is, if a club wins or
loses matches, is to understand some of the management decisions that are behind the
success (or not) of a team and, therefore, may influence their sports performance. As
mentioned before, football clubs are now more than an organization created to entertain
people, they are now “corporate-clubs”, whose interest is to achieve victories on the
matches played and to be as profitable as possible. Management of sports clubs is now
more complex and competitive than ever.

In short, the main goal is to obtain information about financial data of Portuguese football
clubs and observe their sports performance in order to understand which management
decisions are more decisive, or have a bigger impact, over their success.

3.2 Research Objectives

This research will focus on Portuguese Football Clubs, by analyzing specific information
about selected Portuguese Football Clubs, like financial information, players and
supporters, in order to find if there is a high level of competition among Portuguese
Football Clubs. In more detail, the aim is to:

i. Identify the main differences on financial information, either on their income

sources or their main expenses;
ii. Establish a relationship between the financial information described above
and the sport’s outcome, that is, the club’s match results and lastly their
classification on the Portuguese Premier League and titles won;
iii. Verify if Portuguese Football Clubs have a similar composition of players,
regarding their number and nationalities;

32
 Portuguese Football: Managing to Compete

iv. Describe the Club’s relationship with supporters, by analyzing their presence
in the Club’s matches.

3.3 Research Questions

The Research Question that this work explores is:

Are Portuguese Football Clubs competitive among them?

In order to be able to answer the question above, it is important to understand the current
situation of the most prominent clubs playing in Portugal. To do it so, it’s important to
focus on the clubs that show a good record of sports’ performance over a period of time,
because those will most likely be the ones that have been able to stay more competitive
over time. Nevertheless, it is important to explore other questions, like the following ones:

 Is there a correlation between a club’s rank and their revenue sources?

 What about a relation between a club’s rank and their expenses?
 Do the main Portuguese Football Clubs generate profit?
 Are Portuguese Football Clubs mainly formed by Portuguese Nationals?
 Do supporters help to win matches?

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 Portuguese Football: Managing to Compete

4. Data

4.1 Research Design

The research used was based on a quantitative approach. To decide whether to use a
qualitative or quantitative research, it’s important to know the kind of data that’s going
to be collected. Quantitative methods are related to numerical databases and try to test
hypothesis through fixed variables. This method is applicable for rather larger samples
because they are standardized (Silverman, 2006) and facilitate the finding of
generalizable data (Patton, 2002).

Nevertheless, some argue that this type of research has little or no contact with people
and, therefore, variables may be defined in a random way (Silverman, 2006). Moreover,
some social events are simply not explained by the measurement of numbers or statistics,
meaning that, in this situations, a quantitative research method might rather limit the
chances of a finding (Silverman, 2006).

The choice of this research methodology is related to the nature of research question. In
the context of this research, the analysis will trust, essentially, numerical data regarding
financial information, ranks, among others.

4.2 Population Definition

As the analysis is focused on whether Portuguese Football clubs are competitive or not,
the population shall be composed by professional Football clubs who are registered and
participating in Portuguese competitions. The following section will explain the criteria
of selection of clubs to be analyzed.

4.3 Sampling Method

In a simplified version, we can define two main approaches for sampling: random
sampling and non-random sampling. The difference between the two types referred is that
in the random sample the probability of any member of the population being selected is
known, while in the non-random sampling it is not. For this study, a non-random sampling

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 Portuguese Football: Managing to Compete

was used, because the selection was made by professional judgement. The reason for this
choice was that, in order to find out the key elements for competitive clubs, it is important
to understand from the ones that show more competitive skills. In this perspective, it was
delimited the population as the football clubs playing in the Portuguese Premier League,
because this is the most important National competition (Federação Portuguesa de
Futebol, 2017). Nevertheless, the clubs that participate in this competition are not always
the same, as the clubs ranked in the bottom are relegated to other competitions –
Portuguese Second League – and clubs from this last one are promoted to the Premier
League. This helps the competition to be fiercer, as every team’s objective is to play in
the Portuguese Premier League.

Besides the dynamic change in the teams, also the number of teams in the Premier League
has been changing last years. The number of participating clubs has been changing
between 18 and 16 (currently it is 18).

For the reasons above, were selected 12 teams based on their recent history within this
competition, that is, teams that have been playing mostly in the Portuguese Premier
League in the last years. Based on the applied judgment, were selected the following
teams to be analyzed: Porto, Benfica, Sporting, Braga, Vitória de Guimarães, Académica,
Gil Vicente, Marítimo, Vitória de Setúbal, Rio Ave, Nacional e Paços de Ferreira.

4.4 Data Collection and Procedures

4.4.1 Data Collection

To conduct the present investigation, Primary Data collection was used. The reason for
this research method is related to the lack of studies available on the Portuguese Football.
In Primary Data analysis, the individuals who collect the data are the ones who treat and
analyze the same information (Church, 2002).

The information used was collected: (i) from the Portuguese Premier League statistics
regarding the clubs, attendance and players, provided by FPF, in order to understand the
sports’ performance, (ii) from the clubs financial statements in order to understand the
financial results. Some reports were accessed directly on the club’s website and others
were obtained after request by mail or physical meeting. (iii) Finally, information about
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 Portuguese Football: Managing to Compete

followers (supporters) in some online platforms defined as social media (Facebook and
Twitter) were collected by accessing these applications or online platforms.

The financial data collection considered a period of 10 sporting seasons, from the season
2005/06 until 2015/16. Regarding this information, the main difficulty was that for some
of the clubs it was not possible to get the financial statements of some seasons, therefore
they had to be estimated based on the existing financial reports of other seasons for that
team and similar ranked teams for the analysis period.

4.4.2 Data Preparation: Variables

The sources consulted to obtain the previously mentioned data contained extensive
information and so it was needed to define relevant information to use. Considering the
game elements previously discussed in this research, there were 3 main elements that
were considered for the variables: sports performance, supporters and financial
performance.

For the sports performance (outputs) were considered the following variables:

o Season – sports season considered, ranging from 2005/06 to 2015/16;

o Club – clubs considered to analysis (already mentioned before);
o Points – final points obtained in the end of the season;
o Rank – final classification in the end of the season;
o Wins – number of matches won in the end of the season;
o Draws – number of draw matches in the end of the season;
o Loses – number of defeated matches in the end of the season;
o Goals Scored – total number of scored goals in the end of the season;
o Goals Against – total number of goals conceded in the end of the season;
o Player’s n.º - total number of players in the team for that season;
o Player’s av. Age – player’s average age in the team for that season;
o Portuguese Players (%) – percentage of Portuguese players.

The supporter’s analysis considered the following variables:

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 Portuguese Football: Managing to Compete

o Total Attendance – total number of spectators in the stadium for that season;
o Average Attendance – average spectators in the stadium per match;
o Stadium Average Occupation (%) – average stadium occupation, considering the
average number of spectators and the stadium capacity;
o Lowest Spectators n.º - lowest number of spectators in the stadium for a match;
o Highest Spectators n.º - highest number of spectators in the stadium for a match;
o Facebook followers – number of followers in the club’s official page on the social
media Facebook;
o Twitter followers – number of followers in the club’s official page on the social
media Twitter.

Finally, the financial performance considered the variables below:

o Total income (without player’s transfers) – total income without income resulting
from player’s sells;
o Sports receipts from European Competitions – total income resulting from the
club’s participation in the European Competitions, namely European Champions
League and Europe League;
o Sports receipts from attendance – income from ticket sales;
o Membership fees – income from associates fees;
o Publicity – income resulting from advertisement and publicity services;
o T.V. rights – income from television broadcasting rights;
o Receipt from player’s transfers – income from player’s sells;
o Other sports receipt – income from sources that don’t apply to the mentioned
before;
o Assets – club’s assets;
o Total costs – total expenses;
o External services and supplies – total expenses with external services and
supplies;
o Personnel costs – total expenses with all human resources.
o Amortization and Provision – amortization and provision expenses;
o Other costs – expenses that are not included in the above segments.

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 Portuguese Football: Managing to Compete

5. Analysis Of Collected Data

5.1 Descriptive Summary

In order to analyze the collected data, some descriptive statistics were performed and the
conclusions are as following:

Table 1 – Descriptive statistics of clubs

Number of teams
2005/06 12
2006/07 12
2007/08 12
2008/09 12
2009/10 12
2010/11 12
Season
2011/12 12
2012/13 12
2013/14 12
2014/15 12
2015/16 12
Total 132
Number of participations
Académica 11
Benfica 11
Braga 11
Gil Vicente 11
Guimarães 11
Marítimo 11
Club Nacional 11
Paços de Ferreira 11
Porto 11
Rio Ave 11
Sporting 11
Vit. Setúbal 11
Total 132

Table 1 shows that the data used is composed by a total of 12 different Portuguese football
clubs, referring to information about the seasons starting in 2005/06 until 2015/16.

Table 2 – Descriptive statistics of players

n Min Max M dp
Number of players 123 25 47 33,67 4,42
Player’s age average 123 21,84 26,16 24,35 1,00
Portuguese players (%) 123 18,75 72,41 43,67 11,45

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 Portuguese Football: Managing to Compete

Table 2 indicates that each football club studied has an average of 34 players in their
team, whose average age is 24. Also, 43,67% of the players are Portuguese.

Table 3 – Descriptive statistics of sports performance

n Min Max M dp
Points 123 23 88 47,16 16,64
Rank 123 1 18 7,28 4,54
Won matches 123 4 29 13,11 6,04
Lost matches 123 1 17 7,87 2,74
Draw matches 121 1 19 10,32 4,77
Goals for 123 20 88 42,33 14,91
Goal against 123 13 63 36,06 11,88

Table 3 expresses that the Portuguese clubs get an average of 47 points, 13 victories per
season, 8 defeats, 10 draws, score on average 42 goals and concede and average of 36
goals.

Table 4 – Descriptive statistics of stadium attendance

n Min Max M dp
Total attendance per season 123 23526 855474 218792,58 227201,39
Average attendance per match 123 1568 50322 14037,31 14457,01
Average Attendance per match (%) 123 13,00 86,00 45,36 19,15
Lower attendance on a match 123 347 36599 8714,19 10049,13
Higher attendance on a match 123 2064 64235 22128,57 19331,72

Table 4 shows that the average attendance for the considered period was 218.793
supporters per club. Also, the average attendance per match was 14.037 supporters, which
gives an average of 45% of stadiums’ capacity occupation. In the season 2012/13 the club
Vitória de Guimarães had a match played without any attendance as punishment imposed
from the FPF, which also happened to the club Nacional da Madeira in the season
2013/14 for one match. If we don’t consider these two matches where there was no
supporters in the stadium, it’s possible to notice that the lowest number of supporters in
the stadium was 347, while the maximum reached 64.235 supporters at a stadium in a
single match.

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 Portuguese Football: Managing to Compete

Table 5 – Descriptive statistics of club’s income (in euros)

n Min Max M dp
Income (without player’s tranfers) 123 1666659 126075000 21556802,02 28539377,47
Income from UCL 123 1 36170000 2872415,46 6468758,48
Income from UEL 123 1 15677046 601518,60 1879275,54
Income from attendance 123 25372 23699000 3742654,35 6186471,59
Other income 123 80847 33680780 4499912,54 5145899,21
Income from memberships 123 1 9508000 1125011,15 2243265,04
Income from publicity 123 66000 21151000 3659747,89 5399369,60
Income from TV rights and broadcasting 123 450000 34628000 5040005,15 6327760,66
Income from player’s tranfers 55 340000 114959838 19571144,25 24866732,78
Assets 123 1200000 476378000 75413078,55 113207231,94

Table 5 indicates that the average income (without player’s transfers) of the Portuguese
clubs represented are 21.556.802 euros. Clubs that participate in the UEFA Champions
League get an average income of 2.872.415 euros from it and those who find their way
to compete in the UEFA Europe League get an average income of 601.519 euros from it.
Attendance income represented, in average, 3.742.654 euros. From all the other sources
of income for the clubs, highlight for the average 5.040.005 euros that clubs got for T.V.
rights and the average income of 19.571.144 euros from player’s sold.

Table 6 – Descriptive statistics of club’s expenses (in euros)

n Min Max M dp
External services and supplies 123 -42048000 -481948 -7407330,11 9930510,65
Personnel Costs 123 -75790000 -1001471 -14132479,54 18063153,14
Amortizations 118 -18409000 3230223 -1996897,85 3480322,49
Other expenses 123 -9542000 -43254 -1447196,99 1640895,50
Total expenses 123 -124425000 -3027143 -24937847,37 31224860,25

Table 6 shows the expenses for Portuguese clubs by category, where it is possible to find
that, on average, clubs spent 7.407330 euros in external services and supplies and
14.132.480 euros in personnel costs (staff), among other expenses.

5.2 Findings

The gathered data can provide some insightful information to help understand some
success factors, both on a sporting level but also on a management perspective because
in the end what matters is to achieve success while maintaining a sustainable financial
40
 Portuguese Football: Managing to Compete

position. From the observation of the variables in the gathered data, considering the sports
performance only, it’s possible to observe that all the clubs who have won the Portuguese
Premier League during the 11 seasons considered had always the highest number of won
matches in that specific season. A little less obvious is that in 10 out of the 11 seasons,
the winning club scored more goals than any other team, while in 9 out of the 11 seasons
the winning club have also conceded less goals than any other club.

Despite the sports performance it is also important to understand the management and
their impact on the sports success. Nevertheless, the management should be balanced and
sustainable, in the sense that Clubs should be able to keep on top of the competitions but
also avoid having poor financial results that could result in bankruptcy (bad
management).

On the other hand, looking into the financial information it is possible to observe that
management differs from club to club. An interesting fact is that in most cases, expenses
are higher than the income, if we don’t consider player’s transfers. On the other hand, it’s
possible to conclude that winning the championship doesn’t necessarily mean to have the
most income or profit for that season, which gives management some empowerment
because it tells that the financial results will not depend exclusively on the sports
performance.

Considering that the financial variables (income and expenses) represent the
management’s decisions and influence, for this research, this variables were considered
the inputs that, combined, will help to achieve the outputs for the sporting performance.
In this perspective, some tests were performed to find out a correlation between inputs
and outputs, as shown below.

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 Portuguese Football: Managing to Compete

Table 7 – Correlation between sports performance and attendance with financial performance
(income variables)

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

From the above table 7 it is possible to notice a positive correlation between the variables
points, matches won, goals scored and attendance with the general income variables,
meaning that an increase of the various receipts tend to be associated with a better output
of the mentioned data.

On the other hand, there is a negative correlation between the variables rank, matches
lost, matches draw and goals against and the general income variables, which means that
an increase in the income will generate a reduction of the sports outputs mentioned.

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 Portuguese Football: Managing to Compete

Table 8 – Correlation between sports performance and attendance with financial performance
(expenses variables)

External
Inputs services Personnel Other Total
Amortizations
Outputs and costs costs costs
supplies
p -,785** -,816** -,600** -,635** -,824**
Points
Sig. 0,00 0,00 0,00 0,00 0,00
p ,648** ,661** ,468** ,555** ,670**
Rank
Sig. 0,00 0,00 0,00 0,00 0,00
p -,796** -,828** -,600** -,645** -,834**
Matches won
Sig. 0,00 0,00 0,00 0,00 0,00
p ,479** ,493** ,337** ,412** ,499**
Matches lost
Sig. 0,00 0,00 0,00 0,00 0,00
p ,687** ,711** ,543** ,539** ,715**
Matches draw
Sig. 0,00 0,00 0,00 0,00 0,00
p -,805** -,822** -,585** -,638** -,832**
Goals scored
Sig. 0,00 0,00 0,00 0,00 0,00
p ,642** ,673** ,437** ,456** ,668**
Goals against
Sig. 0,00 0,00 0,00 0,00 0,00
p -,837** -,895** -,727** -,658** -,901**
Total season attendance
Sig. 0,00 0,00 0,00 0,00 0,00
p -,842** -,894** -,707** -,660** -,900**
Average attendance
Sig. 0,00 0,00 0,00 0,00 0,00
p -,606** -,625** -,453** -,518** -,633**
Average attendance (%)
Sig. 0,00 0,00 0,00 0,00 0,00
Minimum attendance on a p -,807** -,864** -,690** -,646** -,869**
match Sig. 0,00 0,00 0,00 0,00 0,00
Maximum attendance on a p -,835** -,875** -,649** -,628** -,879**
match Sig. 0,00 0,00 0,00 0,00 0,00
**. Correlation is significant at the 0.01 level (2-tailed).

Looking into table 8 one could say that there is a correlation between the variables points,
matches won, goals scored and attendance with total costs, particularly influenced by
personnel costs. The influence of higher personnel costs over a better sports performance
could be explained by higher wages and higher bonuses paid to players due to their
achievements and success on the pitch. Nevertheless, it could also be that higher wages
could turn on player’s motivation and effort to achieve success on the pitch.

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6. Conclusion

6.1 Conclusions

Is there a correlation between a club’s rank and their revenue sources?

Generally, the better the rank, the better the Club’s revenue streams tend to be. Although
income can be a reward for winning titles, there are other sources of income that are more
specific and allow to have a better understanding if a club’s sports’ performance
(victories) can result in higher income. Regarding this issue, it is possible to notice that
there was a relation between the matches won and the income from attendance.
Nevertheless, it is important to understand the game behind the pitch, where management
can influence the future of the club, as it is responsible for many of the decisions that will
affect their financial statements. For example, one of the highest responsibilities of
Football Clubs are their personnel costs, and management has a direct influence on the
wages. On the other hand, some of the income is also directly dependent of management’s
approval and negotiation skills, like the player’s transfers that plays an important role on
the Portuguese Football Clubs financial statements.

What about a relation between a club’s rank and their expenses?

It was possible to observe the existence of a relation between a club’s rank and their
expenses. The clubs that perform better in the Portuguese Premier League tend to have
higher expenses, especially with the personnel costs. Nevertheless, there could be several
explanations for this fact, like the rewards that players get when they achieve certain
objectives like winning the Championship. Also, it could be explained by higher wages
for the most talented players, as a way to keep them happy and motivated and, more
important, in the club itself. Also, it could be explained by the size of the club itself, as
many clubs have other sports’ competitions and teams, which could get more investment
as the club’s success on the pitch also increases, meaning that the bigger the club gets,
the more expenses it will have.

Do the main Portuguese Football Clubs generate profit?

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 Portuguese Football: Managing to Compete

Yes. From the analysis of the Portuguese Football Clubs’ financial statements, it was
possible to find that they can be sustainable. But what does sustainability mean? Based
on existing literature on this topic it is possible to say that a sustainable business is one
that operates in the interest of all current and future stakeholders in a manner that ensures
the long-term health and survival of the business and its associated economic, social, and
environmental systems (Landrum and Edwards, 2009).

So, taking a look into the data of the selected Football Clubs it’s possible to notice that,
most of them, have higher expenses over income, if no player’s transfers are considered.
Having more expenses than income, if constant over several sports seasons, will have a
negative impact on the club’s sustainability and could lead to bankruptcy. Nevertheless,
when considering the income of the players’ transfers, the financial performance tends to
be neutral or positive.

As football is more complex now-a-days and players move between clubs on a higher
quantity today than they did before, meaning that players’ transfers are a part of the
business, it’s fair to say that transfers are part of the game. In this perspective,
management can choose to try to sell players for a higher value than they were bought, or
even to invest into young players’ formation and sell them for profit.

As a conclusion, we could say that most clubs show higher expenses over income for the
general financial variables, but adding players’ transfers’ income manage to keep a
positive overall income. As players’ transfers get more importance and higher values from
season to season, it is fair to say that they are, currently, part of the business.

Are Portuguese Football Clubs mainly formed by Portuguese Nationals?

By looking into the selected clubs for this analysis, we can observe that more than half of
the players in the Portuguese Premier League are non-Portuguese players. Football
business industry, like almost any other current business in our planet, is exposed
worldwide. Besides the existing regulation of FIFA and UEFA and the competitions
among clubs from different countries that contribute to an internationalization of clubs,
there are also signs of internationalization on the teams itself.

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 Portuguese Football: Managing to Compete

Do supporters help to win matches?

Research shows that the better the sporting performance (matches won), the higher is the
attendance on the club’s matches. This is not enough to say if supporters help to win
matches, because it is not possible to say that supporters’ motivation will help the football
players to play better and achieve better results, because on the other hand it can also be
that the better the football team plays, the more supporters there will be at the stadium.
Either way, it is noticeable that the more sports success a team has, the more it tends to
have their stadiums fill in with more supporters per match.

Also, besides the impact that supporters may have on the football team and their sports’
performance, there is also an impact over the income, as income from attendance plays
an important role on club’s financial statements. It’s also for this reason that there is a
trend in football clubs’ management to engage more and more with the supporters, by
having social institutions, events and promotions to engage with fans.

Are Portuguese Football Clubs competitive among each other?

Although Portuguese Football is not as competitive as other Leagues in Europe, if we

consider that there are clubs from other countries that have a higher dominance
concerning sports’ success, by looking into their victories in European competitions, it is
also fair to say that Portuguese Football has a good potential to become more appealing
for supporters, football lovers and business investors. This potential is shown by several
factors, like the constant presence of Portuguese clubs in the final stage of European
competitions, and also by the recognition of good Portuguese players that get media’s
attention and individual prizes.

Portuguese Football Clubs show that there is big competition among them, although there
are 3 clubs that are clearly dominant: Porto, Benfica and Sporting. The competition exists
because the less competitive clubs are relegated for a second league, which keeps a
rotation of the less successful clubs out of the Premier League. On the other hand, having
more than 50% of foreign players in the Portuguese Premier League shows that the
National competition is interesting enough to attract players from other countries, which
can contribute with more talent and international exposition.

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Finally, it’s very important to keep a healthy record over the financial situation, which,
as mentioned before, it’s not entirely connected with the sports’ performance, but also
with the club’s management. But no matter the management’s vision, which has a lot of
important decisions to define the future like, for example, buying players and promoting
them to sell for higher prices or investing into youth squads, it seems to be very important
to connect with people. Fans can have an important impact over a team’s success, both
regarding the financial and the sports’ performance. Having a good sports’ performance
will help to have more attendance on the Club’s matches which will help to keep the
player’s motivated and will generate more merchandise sold, which will also improve the
media’s attention and therefore increase all the other sources of income like T.V. rights
from broadcasting and publicity, which helps the club to be able to face their expenses
and responsibilities and pursue a long-term sustainability.

6.2 Limitations of the research

This research has its limitations, which will now be pointed out. To start, there is a few
literature and studies regarding Portuguese Football, as there are other Football Leagues
that have more attention and followers. On the other hand, there is also a lack of
information regarding Portuguese Football Clubs, especially concerning financial
information. The reason for the lack of information is that most clubs didn’t have the
obligation to show their financial statements until recently, making it a confidential
information for the club’s administration. Nevertheless, as the collected data concerns
Portuguese Clubs, some of the findings may not be valid in other countries, which could
mean that it is not possible to compare two different leagues based on the same type of
information collected.

6.3 Suggestions for further studies

Football Industry is a business that generates and moves billions of euros each year
globally, which turns it into an interesting business area. Also, the uncertainty of the
sports outcome makes it have a lot of followers worldwide. Nevertheless, its complexity
makes it difficult to study and cover all their Industry areas in just one study, which is
why it is important to try to focus in a few topics to explore. However, after understanding

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the business and competition in a country (like Portugal), the next step should be to
compare with other countries.

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 Portuguese Football: Managing to Compete

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