HALA MADRID Harvard Case Solution & Analysis

Hala Madrid Case Solution

1.      Could you summarize Real Madrid’s strategy?

Real Madrid’s was founded in 1902; it is the world's 4th wealthiest soccer club. President Florentino Perez sought to make the brand Real Madrid as the best soccer club in the world. It was only the soccer team with a strong Global leader profile. Florentino describes his approach as the one which generates sustainable financial profit in future and achieves sporting success as well. The president of the club used three strategies in order to increase the growth of the club.

He professionalized the management team and imposed financial discipline so that team didn't become overextended.  Previously, Real Madrid's marketing activity was limited to technical sponsorship contract with sports apparel manufacturer and Spanish companies, but the new professional management team decided to widen the scope of the brand by targeting the international market. Whenever anew management team targets the international market, the revenue of the company will grow.

The professionalism of the management team was seen as the fundamental strategic issue. The president of the club thinks that's this change would lead to a better decision and better management. But this new management in different areas was not supportive. However,this new system benefited the brand of Real Madrid through the advantage of its commercial potential.Moreover, the image of its players gives the club an important source of revenue.

Financial discipline was another important strategy introduced by Mr. Perez. The reason of this strategy is to develop a culture that avoids unnecessary expenses and helps the club in maximizing its profits.

2.      Is a team budget into the red an acceptable situation? 

The company has taken two situations and compared them with that of base case. The scenario A (Base and Quarterfinals of Champions League) shows positive budgeted revenue when the company didn't made any acquisition. The scenario B (acquisition of 2 Megastars and Quarterfinals of the Champions League) results in negative income due to high payment to each megastar since they are more demanding,are successful performers and grab the eyes of the customers by their fruitful performances on the pitch. The scenario C (4 Rising Stars and Quarterfinals of the Champions League) results in positive income but lesser than base case income due to payment for rising stars. Their cost is low because they are new comers in playing as a team and can improve their performance through their passion,which will help them grow personally as well as help in the organization’s success.

Therefore, the team budget of scenario C has been considered as red in unacceptable situation that helps in cost saving. Moreover,their winning spirit will motivate the team through their energy and zeal. They only require additional training to compete at the high level.

  1. What is the objective of budgeting at Real Madrid? 

The Real Madrid was facing a crisis as the team was not performing well on the pitch.Thus the customers or the football fans started to give the club bitter comments, which affect the profitability.Therefore,the president of the club decided to make the team better through planning and gave back the team coach control over players in order to enhance the performance of Real Madrid.

The main objective of the budget is preparation for the press conference scheduled by the president of the club.The decision made during the planning process will be explained face to face with the press, this will enhance their winning ability in the sport and improve the financial performance of the club.

Along with that, the object of the budgeting identifies new young players with the help of 24 scouts. The main reason for hiring the new players is because they are energetic, have more potential and winning sprit and along with that, to enable the team win its games effectively.....................

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