Business strategy

Baseball is probably one of the most famous sports in the United States, along with basketball. It is very prominent and well-played in different parts of the United States, and is rapidly spreading throughout the world. It is even considered as United States’ national pastime. Minor Leagues pertain to professional baseball teams that play on levels lower than that of the minor leagues and teams in the minor league usually is an affiliate member of a major league baseball team. Competitors of Sports Baseball as a form of entertainment has a number of stiff competitors.

There is the media with all of its forms — television, movies and internet. There are also an increasing attendance in theme parks, amusement parks and even carnivals. Baseball’s tickets would also be an additional expense to a household’s budget. All the more that’s people may be dragged away from enjoying the actual game. Movies never go out of fashion because there will always be something new for the audience. The themes of movies are well-thought of. There are various genres that would definitely fit any individual’s taste and preference.

For every craving of the people, the media will innovate something to fulfill these cravings. Television, a long temptation for youngsters and competition to other forms of entertainment, still gets much attention from the populace. Television offers a wide array of shows for all genders of different ages. With the cable channels and other features and programs in television, most people would rather stay at home watching television instead of going out to watch sports games or even engage themselves in playing sports. Theme parks and amusement parks also offer a lot of fun, especially for the family.

All of these things are stiff competitions for the baseball industry or for sports industry in general. The Birmingham Barons, a minor league baseball team based in Birmingham, Alabama is the focus of this paper. The minor league baseball team, Birmingham Barons, is one of the most recognized baseball teams in the United States. The history of the team will be traced back in 1885 where it was played by many during the early years of baseball. Nearly two-thirds of Barons’ fans attend the games with family members. The typical fan is a college-educated and in an upper to middle income (Birmingham Barons, LLC, 2007).

During 1990s Hipic population in Alabama increased for more than 210%, almost 27% of which are in the Birmingham-Hoover Metropolitan Area which the leading U. S. center for the Hipic population growth and business development (Shattuck, 2005). Birmingham, Alabama also has lots of museums; Arlington Home, Alabama Museum of Health Sciences, Southern Museum of Flight, Bessemer Hall of History, Sloss Furnaces National Historic Landmark, and the Birmingham Museum of Art, the largest museum in the location, are just some to name. A number of festivals are also found in Birmingham, which features music, films, regional heritage.

Future Objectives With these competitive environment of baseball in Birmingham that may be pulling the audience away from the game, the management of the said minor league baseball team should innovate ways to attract not only the Whites, but also the Hipic masses especially now that there is a rapid growth of Hipic population in Birmingham, Alabama. The management could consider developing a more easy to recall jingle or song, that whenever played in radio stations and television, will cling more to the minds of the people.

The Birmingham Barons could also be more visible, not only to the popular masses, but also to those in small towns. Through this, more and more people could know the team and they would be more psyched to see them play. Visibility in advertisements and community work could also help in making them known. Advertisements are a seemingly sure, yet expensive way, of making the team closer to the people’s heart. Birmingham Barons has existed since 1885, thus their advertisement need not be that expensive. What they need is mass promotion.

To know which of the media is most effective for the advertisement, the management may conduct Audience Needs Analysis. This is a survey to determine the medium preferred or most used by the people. For example, they tuned in more often to radio than on televisions. Or most of the people have radio sets than television. Once the management was able to determine the medium preferred by people, they would know where they could put more advertisement about their league. They may also target community radio stations, community television networks, and community newspapers.

These media are not run through sponsorship and thus may accept advertisements and announcements for free. In addition, it caters to the community especially to the grassroots therefore reaching a large number of people. Another strategy to get the attention of people especially the youngsters would be a visit to the places far away from the main office of the team. They could reach out for the out-of-school youth and for those who cannot go to their free games. These people are probably not that exposed to the game and to the team as well and thus did a little or no effort at all to go and watch the live games.

They may also strengthen their fan clubs that will be of great help in promoting their teams and the baseball. The Birmingham Barons could also have school and campus tours. They could visit different primary and secondary schools, introduce their teams to the students, and promote baseball games. In these ways, they will be more visible and exposed to these young people who might have interest with sports. And perhaps for those who don’t have any interest, it would be a start to develop even a little love for sports.

In terms of the number of games which saturated the people, they could have what is so-called Special Game. In here, they may go against the usual happenings in their games. For example, they will have guests from the show business in this specific date of game, a famous actor or actress perhaps. Current Strategies To attract more audience, the management of the Birmingham Barons and the whole minor baseball league offer discounts for the early buyers of tickets, for wholesale buyers of tickets and for long-time customers.

These steps encourage baseball fanatics to reserve tickets earlier and these also heighten the loyalty of the audiences to the baseball team. The team and managements give small gifts and thank you tokens to their fans for their loyalty. They actually give souvenirs and give-aways after the games. The team do play games at 11:00 am designed for school children. Schools get a heavily discounted game and meal ticket for the game and since they start at 11:00 they still get back to the school before 3:00.

They also have youth clinics where children come to the park on Sundays and learn from our players. The Barons created a “Home Run” for the Community Donation Program wherein they give tickets to the non-profit organizations. The non-profit organizations then use the tickets as silent auction items or door prizes and the proceeds were donated. Another community based activity of the Barons is their tie-up with the Pull-A-Part “Pulling against Child Abuse” promotion where they gave donation to a Children’s Hospital (Birmingham Barons, LLC, 2007).

As of now, Barons have what they call Sponsorship/Marketing Kit which includes scoreboard, , radio and stadium advertising. They call for business advertisements during their games through these advertisement mediums. These have become attractive for advertisers because their captive audiences are people of middle to upper classes. As a minor league baseball team, they already have a capability of collecting funds through these sponsorships and that enables them to reach out to the masses. Assumptions and Capabilities

The Birmingham Barons are already getting a big income through sponsorships and tickets sales. Most probably, their income will not actually be affected by giving extra discounts for the long time customers, early and wholesale ticket buyers, and most especially to young fans, Latino or Hipic fans who may be driven away by other forms of entertainment the Birmingham is rich for. Birmingham Barons has already a good business strategy – they have that Marketing and Sponsorship kits which includes radio advertising, and they also have their official website.

This has already enabled them to captive a large number of audiences. In addition, they are also involved in community services and an example is that “Home Run” for the Community Donation Program. The thing they must have some changes is about their target audience. Baseball should not be just for those who have money and can afford to buy tickets, but for other members of the society also. Baseball is a game for kids as what Barons General Manager Jonathan Nelson said during their tie up with Pull-A-Part (Birmingham Barons, LLC).

That’s why I also believe it should be promoted especially to young generation of fans. Baseball is not also for whites, but for everyone. Thus, it is also good to promote this with others like the Hipic or Latino. And it is good to know that Birmingham Barons is offering a family-oriented entertainment through this sport. There are really many factors to be considered and studied carefully before acting or making decision especially in business and its environment. The key point is to focus on the goal and what is really needed.

But the goal is not just to increase the income of sports but must be beyond it. They must also aim to promote the love and patronize for sports. Just think what will happen if the young people of today’s generation will lose interest to sports. And with the Birmingham Barons existence and fame for more or less one hundred years, I know they can make it to the people’s heart to once again gain their attentions and affections for sport. References Birmingham Barons, LLC. (2007). Birmingham Barons. Retrieved November 9, 2007, from http://www.

barons. com/marketing/Barons07-MediaKit. pdf Birmingham Barons, LLC. (2007). “Home Run” for the Community Support Program. Retrieved November 9, 2007, from http://www. barons. com/thebarons/ communitysupport. shtml Birmingham Barons, LLC. (October 2, 2007). Home Runs Help Prevent Child Abuse. Retrieved November 9, 2007, from http://www. barons. com/nm/publish/barons705. shtml Shattuck, Michael. (2005). Birmingham-Hoover Metropolitan Area Population Diversity Summary. Retrieved November 9, 2007, from mhrc. dopm. uab. edu/ resources_new/Birmingham

The ultimate objective of the strategic management process is to enable a firm to choose and implement a strategy that generates a competitive advantage. B. Competitive Advantage – when a firm is able to create more economic value than rival firms. 1. Whenever a firm has a performance advantage over its competition, it is said to enjoy a competitive advantage. This can be by higher perceived value by the customer or by lowering costs. C.

Economic Value – simply the difference between the perceived benefits gained by a customer who purchases a firm’s products or ervices and the full economic cost of these products or services. 1. The size of a firm’s competitive advantage is the difference between the economic value a firm is able to create and the economic value its rivals are able to create. D. Temporary Competitive Advantage – a competitive advantage that last for a short period of time. E. Sustained Competitive Advantage – last much longer. F. Competitive Parity – Firms that create the same economic value as their rivals. G.

Competitive Disadvantage – firms that create less economic value than their rivals. H. Factors That Can Contribute to Why Competitive Advantage Seem to Persist Longer n Some Industries. 1 . Informationally Complex 2. Require customers to know a great deal in order to use an industrys products 3. Require a great deal of research and development 4. Have Significant Economies of Scale are more like to have sustained competitive advantages compare to firms that operate in industries without these attributes. II. Measuring Competitive Advantage A. Simple Accounting Measures of Competitive Advantage 1.

Most popular way of measuring a firm’s performance. 2. Regression analysis – z = . 012(working capital/total asset) + . 14 (retained earnings/Total Assets) + . 033(EBlT/total assets) + . 006(market value of equity/ bookvalue of total debt) + . 999 (Sales/total sales) 3. Profitability Ratios i. Return on Total Assets (ROA) a. Profits After Taxes/Total Assets b. A measure of return on total investment in a firm. it. Return on Equity a. Profits After Taxes/Total Stockholder’s Equity b. A measure of return on total equity investment in a firm. iii. Gross Profit Margin a. sales – COGS/sales b.

A measure of sales available to operating expenses and still generate a profit. ‘v. Earnings Per Share (EPS) a. (After Tax) Profit – Preferred Stock Dividends/ # of Common stock shares outstanding b. A measure of profit available to owners of common stock. v. Price Earnings (PIE) a. (Current market price/share)/After-tax earnings per share b. A measure of anticipated Firm’s performance high PIE ratio tends to indicate that the stock market anticipates strong future performance. v’. Cash Flow Per Share a Atter- lax pronts + aepreclatlon/# 0T common snares outstanalng D.

A measure of funds available to fund activities above current level of costs. 4. Liquidity Ratios i. Current Ratio a. Current Assets/Current Liabilities b. A measure of the ability of a firm to cover its current liabilities with assets that an be converted into cash in the short term. i’. Quick Ratio a. Current Assets – Inventory/Current Liabilities b. A measure of the ability of a firm to meet its short-term obligations without selling of its current inventory. 5. Leverage Ratios i. Debt to Assets a. Total Debt/Total Assets b.

A measure f the extent to which debt has been used to fianc© a firm’s business activities. it. Debt to Equity a. Total debt/Total Equity b. A measure of the use of debt versus equity to finance a firm’s business activities. iii. Times Interest Earned a. Profits Before Interest and Taxes/Total interest Charges b. A measure of how much a firm’s profits can decline and still meet its interest obligations. 6. Activity Ratios i. Inventory Turnover a. COGS/Average Inventory b. A measure of the speed with which a firm’s inventory is turning over. it. Accounts Receivable Turnover a.

Annual Credit Sales/Accounts Receivable b. A measure of the average time it takes a firm to collect on credit sales. iii. Average Collection Period a. Accounts Receivable/Average daily sales b. A measure of the time it takes a firm to receive payment after a sale has been made 7. Limitations of Simple Accounting Measures i. Managerial Discretion a. Managers often have some discretion in choosing accounting methods. This can have an impact on these adjustments. b. Positive Accounting and four conditions which managers may choose to adjust their reported simple accounting performance. When the value of a manager’s compensation depends critically on the reported accounting performance. (exaggerate performance) * When a firm’s actual accounting performance violates capital market expectations. (exaggerate performance) * When a firm’s actual level of performance would hurt might lead to government antitrust action. reduce performance) * When a firm’s actual accounting performance would hurt it in negotiations with labor or other key stakeholders. (reduce performance) 8. Short-Term Bias i. Most simple accounting approaches to measuring performance have a built-in short-term bias. . Valuing Intangible Resources Capabilities i. Accounting measures of firm performance is that they generally do not fully value a firm’s intangible resources and capabilities. it. Intangible Resources and Capabilities – productive assets that are difficult to observe, describe, and value but tnat can nave a slgnlTlcant erect on a Tlrm’s perTormance. Limitations Effects 0T Accountlng i. Simple accounting measures of performance are limited, but if these limitations are inconsequential, accounting numbers may still be an extremely accurate and convenient measure of firm performance. it.

However research has stated that it is very likely that these limitations are the cause of many of the difference of these firms. A lot of research states it can be inaccurate but it should use and Judgment applied. B. Adjusted Accounting Measures of Competitive Advantage 1 . Adjusted accounting numbers take advantage of the broad availability of ccounting numbers but do so in a way that avoids many of the limitations of simple accounting measures of firm performance. 2. Three Adjusted Accounting Measure of a Firm’s Economic Performance i. Calculating Net Operating Profits Less Adjusted Taxes (NOPLAT) a.

It is necessary to calculate three numbers from a firm’s profit and loss statement and balance sheet: (1) earnings before interest and taxes (EBIT) (2) Taxes on EBIT (3) Changes in deferred income taxes. * EBIT= net sales – (COGS + selling, general, and administrative expenses *depreciation expenses) * Taxes on EBIT = provisions for income taxes + tax shield on interest expense – (tax on interest income + tax on non-operating profit) * Changes in deferred taxes deferred tax t-1 – deferred tax. * NOPLAT= EBIT – Taxes on EBIT + Changes in deferred income taxes li. Calculating Invested Capital a.

Invested capital is the amount of money a firm has invested in the operations of its businesses. b. Invested Capital = (operating current assets + book value of fixed current assets) – (net other operating assets *non-interest + bearing current liabilities) * Operating Current Assets= operating cash + Accounts receivable + nventory + other current assets * Book Value of Fixed Current assets = gross property, plant, and equipment – accumulated depreciation * Net operating other assets = other operating assets – other long-term liabilities * Non-interest-bearing current liabilities= accounts payable + accrued liabilities iii.

Calculating the Weighted Average Cost of Capital a. A firm’s WACC is the weighted average of the MC of all of a firm’s sources of capital, including its debt and equity. b. The Cost of Debt * Different kinds f debt have different costs. The cost of a firm’s debt can be stimated based on the quality of that debt as evaluated by services etc. * If a firm’s interest payments are tax-deductible then the pretax cost of debt must be adjusted to reflect the tax benefits of debt. After-Tax Cost of debt = (1 – marginal tax rate) cost of debt. If a firm has many quasi debt forms (leases, preferred stock, etc) ten additional work may be necessary. c. The Cost of Equity * CAPAM * cost of Equity = RFRt + – RFRt] * RFRt = the risk-free rate of return in time t * BJ firm J’s systematic risk * E(Rm,t) the expected rate of return on a fully diversified portfolio of securities at imet * var (Rm) * Where COV (R], Rm) = the covariance between returns from firm Js securities and the overall securities market. * Var (Rm)= the variance of overall security market returns lv. calculatlng A Hrm’s Return on Investec caplta a.

ROIC equals a firm’s operating profits divided by the amount of capital invested in a company and characterizes a firm’s return on its capital for a given time period. b. If a firm’s ROIC is greater than its WACC, that firm is generating profits in excess of the capital required to generate these profits. (Excellent performance) c. If ROIC ; WACC it is achieving inferior economic performance. d. Goodwill in Calculating ROIC * Is defined as the difference between the market value of an asset and the price a firm paid to acquire that asset. Calculating ROIC including goodwill measure how well the firm has invested its capital, whether it has generated a return on its capital in excess of the cost of its capital. * If a firm has overpaid for several assets, then that firm could have an ROIC, excluding goodwill, greater than the cost of capital, but an ROIC, including goodwill, less than the cost of capital. v. Calculating a Firm’s Economic Profit . A firm’s EP and its ROIC are closely related. b. EP calculates the actual economic value created by a firm in a given time period in dollar terms. . A firm with superior performance, the difference between ROIC and WACC will be positive. This is an indication of how much wealth they have created. d. A negative shows how much they have destroyed. v’. Tobin’s Q a. Defined as the ratio of a firm’s market value to the replacement cost of its assets. b. A q greater than 1 is an indicator that a firm is generating superior performance . Less than 1 indicates the firm has low levels of performance. C. Weakness of Adjusted Accounting Measure of Firm Performance 1.

Measurement Problems in Estimating B i. Betas calculated in these different ways can vary. it. The estimate of Beta typically requires a relatively long data series both for the returns of an individual firm’s securities and for expected market rates of returns 2. Theoretical Mis-Specification of the CAPM i. There is growing concensus that this model is an incomplete explanation of how returns on a firm’s securities are generated 3. Intangible Resources and Capabilities and Adjusted Accounting Measures of Performance. One of the important limitations of simple accounting measures of firm performance is the inability of these measure to incorporate information about the cost of acquiring or developing intangible resources and capabilities in a firm. D. Other Measures of Firm Performance 1 . Events Study Measures of Performance i. It is possible to use the stock market’s reaction to the implementation of a particular strategy to gauge the value created (or destroyed) by that strategy. it. Semistrong Form – the price of a firm’s debt and equity fully reflects all publicly vailable information about the economic value of the firm. ii. Event – implementation of a new strategy marks the beginning of an event. ‘v. Event Window – the period of time between the beginning of an even and the end of an event is called the event window. v. Cumulative Abnormal Return – A measure of the total value created by a strategic event. vi. If XRJ, t is less than zero, then a firm wlll nave earned less tnan I ts nlstorlcally expected return on Its new strategy In eacn time period. vii. If a firm’s XRJ, t is greater than zero they earned a greater than historically expected return. viii.

Equal to zero, the firm would have earned Just its historically expected return in each time period. E. Sharpe’s Measure 1. In Sharpe’s measure of firm performance, a firm’s stock market performance is compared toa firm’s total risk. 2. A measure ofa firm’s return dollars per unit of risk. 3. The higher the value of S], the greater the dollar return per unit of risk and the greater the economic performance of a firm. F. The Treynor Index 1. Treynor’s index compares returns to the firm’s systematic risk. G. Jensen’s Alpha 1 . This measure is computed by comparing a firm’s stock market performance to its isk adjusted expected performance. . Greater than zero suggest the firm is outperforming the market 3. Less than zero suggest that a firm is underperforming the market. 4. Equal to zero suggest that a firm is performing at market levels. Ill. Stake Holder’ Alternatives A. Residual Claimants – Shareholders receive any cash in excess of what is required to pay Offa firm’s other claimants. 1. Those other claimants largely determine a firm’s costs. B. Stakeholders – are those institutions and groups that provide a firm with resources and thus have an interest in how a firm perofrms.

Aldi sets up stores in lower middle class suburbs. Once they attract customers it expands its business by opening new stores in the surrounding area. This is cost efficient since the cost of land is minimized by utilizing the aggressive site acquisition strategy. Also, the size of Aldi stores is small which allows it to be managed efficiently in terms of size of the warehouses. Aldi is open during the prime shopping hours i. e. 9am to 7pm from Monday-Saturday and 10am to 6pm on Sundays. This implies that Aldi is open for 19 hours less/week compared to the other supermarkets in the surroundings.

This is beneficial as it cuts down the labour costs which would allow Aldi to utilize this amount towards the betterment of the stores. Staffing is kept minimal with just 5 employees including cashiers compared to the other supermarkets. This would lead to further cutting down on the labour costs. Shopping bags are not provided in Aldi stores and shopping bags should be purchased by customers which cost between 3p to 79p/bag. This leads to encouraging customers to bring their own shopping bags and an added purchase at Aldi.

Unnecessary costs such as advertising is not undertaken by Aldi and promotion of their products is through catalogs, local press advertising and web updates. Even the minimum advertising includes mainly about ‘surprise buys’ which change weekly and are held until stocks last. This way Aldi makes sure that costs to maintain a marketing department is excluded and inclusion of ‘surprise buys’ is a strategy to ensure that stocks get cleared quickly, attract more customers by providing value services.

Advertising of its premium product range would attract more customers who are willing to try which adds to allowing Aldi to grow as a leading retailer store which is their long term goal. Aldi aims at the upmarket customers or more generally the ABC1 class who like to benefit from the main theme of Aldi being a hard discounter. Since the prices of the products are kept low services such as coupons, sales, membership cards are excluded.

Membership card facilities are provided by those organisations as a means to maintain customer relationship. Customers would return to benefit from Aldi’s product due to their low prices and good quality further enhancing the customer relationship. Aldi following a quality discount model, it retains its position by powering ahead of their competitors in the UK grocery store business. Thus, strategy is important to ensure that stability of Aldi or in fact any organisation to the changing environment.