The win/profit maximization debate: Strategic adaptations as the answer?

Terrien, M, Scelles, N, Morrow, S, Maltese, L and Durand, C (2017) The win/profit maximization debate: Strategic adaptations as the answer? Sport, Business and Management: An International Journal, 7 (2). pp. 121-140. ISSN 2042-678X

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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 towards a soft budget constraint from year to year, and vice versa. Design/methodology/approach Financial data from annual reports for the period 2005/2015 was collected for the 35 Ligue 1 clubs. To define the degree of compliance with the intended strategy for those clubs, an efficiency analysis was conducted thanks to the data envelopment analysis method. This measure of performance was supplemented with the identification of productivity and demand shocks to identify whether clubs suffered from such shock or changed their strategy. It enables to precise the nature of the evolution in the utility function, with regards to the gap between expectation and actual performance. Findings The paper suggests that a team can switch from one orientation to another from year to year due to the uncertain nature of the sports industry. The club director’s utility function could also be maximized under inter temporal budget function in order to adjust the weight between win and profit according to the opportunities in the environment. Originality/value The paper sheds 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 identifies a new explanation for persistent losses in the sports industry.