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Changing Times At The NBA. MGT 685 Group Assignment 1 Team Arsenal Fay Bozich , Julie Burks, Stephanie Meade, Stephanie Savicki , and Karen Simmons Oct 11, 2012. Question.
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Changing Times At The NBA MGT 685 Group Assignment 1 Team Arsenal Fay Bozich, Julie Burks, Stephanie Meade, Stephanie Savicki, and Karen Simmons Oct 11, 2012
Question Though the NBA experienced substantial success and rapid growth from the 1980s through the mid-1990s, it experienced slower growth and a waning fan base in the late 1990s and early 2000s. With the changing landscape of the NBA related to player profiles, fan perception and internationalization of its product, what strategic decisions should the league make to improve the quality of its product in order to reverse the recent negative trends and strengthen the existing fan base, while expanding this fan base to new markets abroad?
Sub-Questions What factors in the external and internal environment have an influence on the league and how can the NBA capitalize on the opportunities and mitigate the risks of the threats? How has the NBA evolved from the 1980s to the 2000s and, as of the 2004 season, what are the pertinent issues threatening the NBA’s future success? What specifically has led to the decrease in fan base and overall popularity of the NBA? Strategically, what does the NBA need to continue/change in the future in order to revitalize its fan base and to establish itself once again as a strong, sustainable brand that is beneficial for all stakeholders?
What factors in the external and internal environment have an influence on the league and how can the NBA capitalize on the opportunities and mitigate the risks of the threats?
NBA PEST Analysis Snapshot = Opportunity = Threat
PEST Analysis (2004) Finding: Amidst the decreasing attendance and revenues, it seems that there are not many external factors that are causing these trends. Several of the above items could be seen as opportunities or threats, depending on how they are analyzed, but none of them can be seen as a strong threat to the NBA’s success. It is apparent that there are crucial factors causing the NBA’s lack of success, but it can be inferred that these issues are mainly internal, as opposed to external.
NBA Industry Analysis (2004) For the Die-Hard Fan Finding: The NBA has multiple stakeholders, the player salaries are their largest cost, without fans buying tickets and watching the game their revenue would suffer significantly. Knowing this where should the NBA focus their efforts? Stakeholder analysis is needed to evaluate each impact.
NBA Industry Analysis (2004) For the Casual Fan Finding: The NBA is in an industry that is strongly influenced by the consumer dollar and consumer choice. If the NBA does not present itself as the most attractive option, the consumer has the ability to go elsewhere to find entertainment. The NBA must focus on what the consumer finds to be attractive.
Target Market Segmentation Analysis Finding: The main takeaway here is that the loyalty of the fans is centered on the players, not the teams. This is further evidence that the league MUST focus on developing their players. The league must create respectable, mature players that the fans want to cheer for. Also, with the league continuing to seek talent internationally, this will help to establish fan bases in these other countries.
Directional Policy Matrix – NBA League in the US NBA League Ops NBA Entertainment NBA International (N/A) WNBA (N/A) National Basketball Development League Finding: Though the NBA is average in providing its fans with a good product and decent entertainment, its current struggles prove that it needs to invest more heavily in their product (their players) and in providing their fans with a better experience. In looking at the NBDL, the NBA either needs to use it more effectively or divest, as this is currently not adding much value to the organization.
Under-Utilized Program The NBA should use the NBDL as a true minor league program. By merging the NBDL and select Player Development Programs, the NBA can educate and develop players that will attract fans, and positively represent the league’s mission. • Training ground for staff, officials, and players. • Minimum 20 year age requirement • As of 2001, located in NC, SC, GA, AL, and VA. • Life Skills Training • Counseling and Assistance • Education and Career Transition • Rookie Transition Program • Pre-Draft Player Information Program
How has the NBA evolved from the 1980s to the 2000s and as of the 2004 season, what are the pertinent issues threatening the NBA’s future success?
League Evolution Finding: The NBA has morphed into a different entity than it was in years past. In 2004, the league is drastically different than it was prior to the mid-1990s. The league had a much stronger fan base in the 1980s and 1990s, so the NBA needs to focus on what made them successful.
Player Profile Finding: The internationalization of the sourcing of NBA players proves to help the league, in that it increases the quality of play, as well as broadening the fan base to now include fans from countries from all over the world. The main negative related to the current player profile seems to be the younger players coming straight from high school. This is an issue that the NBA needs to address immediately in order to improve the fan perception of these young players and of the quality of play in the NBA.
Transformation of the Recruitment Process Finding: While the league allowed early entry candidates into the league to financially gain from their talent, the league did NOT put any emphasis on their transition into the NBA, their maturation on/off the court or the development of their skills, both in the game of basketball and in their personal lives. If the NBA is promoting this trend, they need to then invest in these players so it doesn’t backfire on them in the way of hurting in the brand image.
NBA Facts: 1984 vs. 2003 Comparison Finding: Since the last union lockout had very negative effects on the league, the NBA needs to work with players to ensure this doesn’t happen again, even if it means increasing their salaries or loosening the restrictions of the salary cap.
NBA Revenues and Expenses -2004 Revenues Costs Finding: Player salaries are 63% of costs, while major revenue sources are TV and Gate receipts, signifying the financial importance of a strong supportive fan base. Out of these revenues and costs, which ones are fixed and which are variable? Can the NBA do anything to decrease the costs, while increasing revenues?
Analysis of Major Revenues/Expenses Finding: It seems that the only truly controllable revenue stream for the league at this point is the gate receipts. With fans perceiving current ticket prices as being too high and the product as lacking in quality, will this really bring more fans to the games? It would be cheaper for fans to go, but will they want to? Would international fans view the product differently than the fans in the US? TV contracts represent the largest source of revenue, and it appears that the NBA could strategically increase this revenue stream by increasing the quality of their product and continuing to broaden their fan base internationally. Common denominator to increase these revenues = INCREASE THE QUALITY OF THE PRODUCT!
Success Factor Evaluation Finding: The NBA knows the Critical Factors they need possess to be successful. Currently, they are lacking strong success factors; however, four of them have a very clear solution. The league needs to focus on these young players and their development in order to change the fan perception of their players and the quality of the league.
NBA’s Present Stakeholder Dissatisfaction • Unhappy with eroding brand image • Worried about dissatisfaction of players and how it may negatively affect their products • Want higher salaries • Veterans mad about international players and early entry candidates taking away from their salaries/playing time • Unhappy with eroding brand image • Worried about dissatisfaction of players and how it may negatively affect their performance • Have a lot of money on the line and frustrated with the decrease in attendance and revenues • Dissatisfied with player off-court behavior • Don’t like rising ticket costs • Can’t identify with players Finding: The NBA has multiple stakeholders, and in order for them to be successful again, we strongly recommend the NBA address each of these stakeholders needs and ensure that they are satisfied. Their success will be the direct result of the satisfaction of these stakeholders.
What specifically has led to the decrease in fan base and overall popularity of the NBA?
Correlating Trends: What is the message? Finding: This graph proves that the NBA needs to focus on the largest revenue stream, which is TV contracts. If the TV ratings are negatively impacted by early entry candidates, this could have a negative impact on TV contracts as well. What does the NBA need to do to reverse the negative impact that early entry candidates have on overall fan perception and, ultimately, TV ratings.
Fan survey-Negative Fan Perception Finding: Results from an ESPN fan survey shows the main reasons fans are dissatisfied is directly related to the players themselves. By addressing these issues, the NBA may be able to rejuvenate their fan base, thereby increasing attendance and revenues.
Destructive Cycle of the NBA NBA Finding: The NBA’s attempt to create a fair and balanced league has led to a litany of issues for them, ultimately deteriorating their brand image and creating a substantial loss in their fan base, which has led to decreased revenues and lower attendance. The NBA needs to focus less on creating a sense of equality among teams by implementing salary cap and more on their players, which are the main product. The fans want to cheer for players they respect and who they can related to, and they want to see games that include several superstars playing for both teams.
Strategically, what does the NBA need to continue/change in the future in order to regain the popularity it once enjoyed and establish itself once again as a strong, sustainable brand that is beneficial for all stakeholders?
Directional Policy Matrix – NBA League in the US NBA League Ops NBA Entertainment National Basketball Development League Finding: In investing more in the NBA players and enhancing the fan experience, our recommendations will help to increase the NBA’s competitive capabilities by satisfying all stakeholders, which will result in these divisions being leaders in the industry.
