Question

Discuss why sports clubs or owners may seek to maximise win probability/ win ratio, possibly subject to attaining a minimum profit level, rather than maximise total profit. (Limit answer to 2 pages)

Answer 1

Answer) I will use the concept of building brand and brand valuation to answer this,when someone buys a sports club,they pay the amount equal to brand valuation which includes future valuation as well,includes fan base as well,includes brands associated with it that is buyers pay for holistic brand value not what current profit is,so when sports clubs or owners seek to maximize win ratio and invest in it heavily,they are trying to build a brand,a brand with a huge fan base,this fan base serves as a potential for advertisements,jersey,sponsors deals,your fans will stay with your club if you win more often,consider for example Manchester United,club has huge following around the world,30 years back it was not as big as it is today and then a series of victories under sir Alex Ferguson grew its fan base which is loyal beyond imagination and drove its value,another recent example would be of Manchester United 's rivals that is of Manchester City,in 2008 City football club was bought for close to £200 million,club has spent huge amount on transfers,coaches,facilities and has been champions four times since 2008 growing its fanbase significantly along with its valuation which is now close to £2.5 billion,so despite lot of spending club 's valuation has soared owning to its extremely high win ratio and successes,thereby proving why owners prioritise win ratio over profits.

Answer is complete.Thank you!