The win/profit maximization debate: strategic adaptation as the answer?

Abstract

Purpose -The purpose of this paper is twofold. First, to highlight the heterogeneity of the organizational aims within the professional football teams in Ligue 1. Second, to understand why some teams swing from a win orientation toward a soft budget constraint from year to year, and vice versa.Design/methodology/approach -Financial data from annual reports for the period 2005/06 -2014/15 was collected for the 35 Ligue 1 clubs. To define the compliance degree of the intended strategy of those clubs, an efficiency analysis was conducted thanks to the data envelopment analysis (DEA) method. This performance measure was supplemented with the identification of productivity and demand shocks to build a theoretical model. It allow to precise nature of the evolution of the win/profit tension in the utility function related to the gap expectation/performance. Findings -The paper suggests that a team can switch from one archetype to another from year to year due to the stochastic nature of the sport industry. The club director's utility function could also be maximized under an intertemporal budget function to adjust the weight between win and profit according to the opportunities in the environment.Originality/value -The paper shed new light on the win/profit maximization. The theoretical model provides an assessment of the weight between win and profit in Ligue 1 and then points a new explanation for persistent losses in the sport industry.

Indirect Evolution and Aggregate-Taking Behavior in a Football League: Utility Maximization, Profit Maximization, and Success

“…Equation 18states the same for win maximization. The dynamic processes defined by Equations (17) and (18) come to an end if the respective fixed points are reached.…”

“…Dietl, Grossmann, and Lang [17] analyzed the effects of revenue sharing in a model in which teams adopted a mix of profit and win maximization. Terrien et al [18] demonstrated with data from the first French football league (Ligue 1) that teams may switch between profit and win maximization strategies over time, because of an uncertain industry environment that may provide respective opportunities at different points in time. In the paper, a profitability measure was employed to differentiate between profit maximization, win maximization with a hard budget constraint, and win maximization with a soft budget constraint.…”

“…In the paper, a profitability measure was employed to differentiate between profit maximization, win maximization with a hard budget constraint, and win maximization with a soft budget constraint. Osokin [19] used the approach of Reference [18] to investigate win and profit maximization strategies in the first Russian football league.…”

European Sports Leagues: Origins and Features

“…This author [Sloane], on the other hand, has argued elsewhere that football clubs are essentially utility maximizersthe majority of clubs making a loss on their football activities only survive through subsidies derived from various sources." This early opposition between North American and European sports leagues is still largely accepted around 50 years later even though a North American club is not automatically profit-maker (Andreff, 2015;Lavoie, 2004) and a European club may seek to make a profit (Terrien, Scelles, Morrow, Maltese & Durand, 2017). According to Sloane (1969, p. 182), team objectives and the need for strong competitors "are crucially important when assessing the conditions under which the professional footballer is employed and explain why such marked differences must exist in terms of employment as compared with the industrial worker."…”

Equilibrium team selection in football under win or profit maximisation

“…Many authors argue that such differing preferences could explain the very different economic development which has been observed between European and US sport -see, e.g, [13,14,17]. The argument is related to an obvious point; if one is merely interested in winning matches, deficits may occur easier than if profits are the objective.…”