Keen to project the passion associated with sports onto their products, international businesses have sought tie-ups with athletic events as far back as the first modern Olympic Games in 1896, which were supported by Kodak. But some sectors sit more easily with sports than others: the testosterone-driven auto industry is a natural fit. In its bid break into the top-five list of global automakers by 2010, Korea’s Hyundai is relying heavily on the added awareness and momentum that international sports sponsorship deals can bring.
Hyundai was the official vehicle supplier for the summer Olympics in Athens in 2004, providing a fleet of sedans and minivans to haul around the tens of thousands of athletes, VIPs, officials and journalists attending the games. Hyundai also offered a free bus service to the public and set up a ‘Hyundai Land’, where Olympic visitors could listen to live music, play interactive games and learn more about Hyundai products. The total sponsorship package was valued at E16.3m, including automobile supply, services and cash for the exclusive rights.
Emotional bonds
“Sports sponsorship is one of the most effective ways of creating a closer emotional bond with existing as well as prospective customers,” Hyundai Motor Co vice-chairman and CEO Kim Dong-Jin said when announcing the Athens deal.
An international sporting event can offer a great stage on which to showcase products to a global audience, and what bigger stage than the Olympics? In the case of Athens, however, Hyundai was playing as much to the home crowd as the international one. For Hyundai Hellas, it was a chance to solidify brand leadership in Greece, the European country where Hyundai has its highest market penetration level and where it is now the second best-selling car brand.
This was an approach that Hyundai had already used – to great effect, it seems – to boost brand recognition across western Europe, where its name was less well known than in North America. After its sponsorship of the 2000 and 2004 UEFA Euro football championships and the 2002 FIFA World Cup, awareness of the Hyundai brand tripled in western Europe, the company claims. Now, sales are growing at about 10% a year and the region is its fastest-growing market in terms of export sales. This upswing, says Hyundai, is a “direct result” of its football sponsorship programme.
Positive images
Electronics company Samsung, which co-sponsored the 2002 World Cup alongside Hyundai, won over many fans with its huge LCD panels showing the matches outside the main venues and, like Hyundai, benefited from the positive images of Korean industry, and of Korea itself, that were projected around the world during the five weeks of football. Also like Hyundai, Samsung believes sports-related marketing is the best ticket into the big leagues of global brands.
Football is a particular favourite for corporate sponsors – and it is a big-money business. Six official partners for the 2010 World Cup, which is due to take place in South Africa, have signed deals with FIFA for up to $240m each. Coca-Cola, whose relationship with FIFA dates back to 1930, has a sponsorship arrangement in place that is worth $500m and lasts through to 2022.
“Coca-Cola is the world’s number-one brand and football is the world’s number-one sport,” a company spokesman tells fDi. “The Coca-Cola Company is investing not just in global tournaments but in grass-roots sports development, especially football.”
The catchphrase for Coca-Cola’s global football campaign is ‘We All Speak Football’, through which the beverage giant “is rebuilding trust, confidence and system-wide passion as a springboard to greater global growth and worldwide engagement with stakeholders”.
Acting as a major sponsor for the first World Cup to take place in Africa will allow Coca-Cola to bolster its already dominant position on a continent that is seen as an important growth market and in a country that is the company’s ninth-largest market worldwide. “Our beverages are the most popular in Africa and football is like a religion in Africa,” the Coca-Cola spokesman says. The synergy is obvious.
Peripheral projects
Beyond their usefulness as marketing vehicles, sporting events offer an almost endless array of business opportunities, from constructing venues, facilities and infrastructure, and supplying products and services, to entertaining clients or suppliers in corporate boxes.
Infrastructure projects are the big-ticket items but, more often than not, they are funded by the host governments with minimal private sector investment.
Malcolm Gresty, as a manager at infrastructure and building consultancy Arup, was involved in Beijing’s bid for the 2008 Olympic Summer Games and took Chinese officials on a tour of Manchester, host of the 2002 Commonwealth Games, and other UK cities with experience in holding big sporting events.
“I think what they learned was that large sporting events don’t necessarily bring investment in building sporting facilities; it tends to be in the peripheral activity, like hotel development,” he says.
“There are not a great deal of investors prepared to throw money into the major sporting facilities unless there happens to be a commercial element in it, either a hotel or retail or office space development.”
Space for beds
New Delhi will welcome 8500 athletes and an expected 17,000 tourists for the 2010 Commonwealth Games, and the race is on to create enough hotel space to accommodate them. The Delhi Development Authority hopes to raise $224m in upcoming auctions of eight plots of land in the athletes’ village area earmarked for hotels; more auctions are due to follow. Local hotelier Lalit Suri is building a 300-room hotel in neighbouring Uttar Pradesh in anticipation of the games but many more are needed, and quickly.
South Africa, host of the 2010 World Cup, is also short of hotel beds, so massive tourism investment opportunities exist there, too. There is a particular need for budget accommodation and ‘cultural tourism’ providers, as well as scope for more family resorts, beach resorts and casinos, among other amenities. In the high-end property market, investors are banking on a rise in prices leading up to the event.
Contracts up for grab
After the closing ceremonies in Beijing, attention will turn swiftly to London, the 2012 Olympic Games host city. Bidding for contracts has already begun, although the majority of procurement will take place from 2007 onwards.
Think London, the capital’s economic development agency, is organising an international road show to educate foreign companies on what opportunities exist for Olympic contracts, how to place bids and how the procurement process will work. Apart from encouraging overseas companies to get involved in the London games, Think London also has an interest in ensuring that the companies set up some physical presence in the UK to service their contracts.
Although it is difficult to make a hard connection between sports and corporate location decisions (see below), companies can certainly benefit from the presence of sports venues and the occurrence of athletic events in places where they operate.
“Some location projects have particular emphasis on quality-of-life criteria. These are typically those involving situations where the company wants or needs to recruit a substantial part of its labour from outside the area,” explains Christopher Steele, director of location advisory services at consultancy Mintax Inc.
In such cases, if employees need to be relocated, factors such as cultural and recreational amenities will certainly be considered, he says. That includes sporting events. Such amenities can also be useful if a company is establishing a function that requires entertaining clients or corporate partners.
Depending on the industry, close proximity to well-known sporting venues can also be good for a company’s market profile. “I had one client who manufactured sporting goods who specifically wanted to be in a ‘sports town’ because of its own corporate image,” Mr Steele says.
Networking events
In the belief that running business-networking events in parallel with large events such as the Commonwealth Games makes it more convenient – and more fun – for businesspeople, Manchester officials created a Business Club to help smaller and medium-sized businesses in greater Manchester and the north-west of England to gain commercial benefit from the games. More than 5000 businesses signed up.
And it works in reverse as well: MIDAS (the city’s investment agency) and its partners have organised trade missions to coincide with big events going on in the destination countries. Arrk, a local software company, has since set up offices in India as a result of participating in one such ‘mission within a mission’.
Activity around the Commonwealth Games has enabled information and communication technology businesses in the region to break into new markets in India and Australia, and establish stronger links in the sector around the north-west, according to a report from the Cambridge Policy Consultants on the commercial effects of the games and related business programmes.
The Manchester group was modelled on the successful Business Club Australia, which was set up for the Sydney Olympics in 2000 but has been continued for subsequent events, such as the Rugby World Cup in 2003 and the 2006 Commonwealth Games in Melbourne.
Business disruption
What often goes unmentioned in all the talk of commercial opportunities is the disruption caused to local businesses during the events themselves. “In both the Salt Lake and Atlanta Olympics, many office-based businesses chose to close down or encouraged their employees to work from home during the events. Getting to and from the office would not have been possible due to traffic and other demands on infrastructure. In Atlanta, for example, much of the MARTA rapid transit system was earmarked for moving ‘the Olympic family’,” remembers Mr Steele.
In London, a public inquiry has been launched into a compulsory purchase of land in east London, to make room for the Olympic site, that will force 200 companies employing 5000 people to relocate. Although suitable agreements have been reached with owners of most of the land, some of the companies involved are demanding greater compensation, better terms and more time to move.
In business as in sport, there are inevitably both winners and losers. While some companies score new customers and post higher revenues thanks to their involvement with international sporting events, others will inevitably lose out.
Do international events influence location decisions?
Just as corporate sponsors hope to boost name recognition through sporting events, host cities and countries hope to do the same by using their moments in the international spotlight to raise awareness of their location brands.
Germany is counting on its hosting of the World Cup this summer to improve not only its international image but also its self-image. FC Deutschland (Fan Club Germany), a public-private partnership, has kicked off a $25m public relations campaign highlighting German innovation and touting Germany as the ‘Land of Ideas’.
South Korea’s co-hosting of the 2002 World Cup did wonders to offset negative international perceptions that have traditionally made it difficult to persuade business leaders to look seriously at the country as an investment destination. During the tournament, Koreans showed themselves to be tech-savvy, well-organised, enthusiastic and gracious: they could not have shown a better face to global investors.
Like many other Olympic cities, Salt Lake City in the US sought to tie its hosting of the 2002 Winter Games directly to state investment promotion efforts. If nothing else, the Olympic experience did help to streamline those efforts and untangle lines of responsibility.
But a direct link with actual investment flows is difficult to determine. “The bottom line is that the Olympics did a lot for the image of the city but not much for business attraction, and I suspect that is a typical experience for most such cities,” says Bruce Donnelly, president of Global Direct Investment Solutions in Chicago.
What major sporting events do provide is a good excuse to bring in corporate decision makers and site selection consultants, and put on a show about the benefits of locating in the community. Korea’s Ministry of Commerce, Industry and Energy invited 50 C-level executives at top international companies to participate in the World Cup opening ceremony in addition to several side events aimed at promoting foreign investment in Korea.
This also goes for smaller-scale sporting events, such as regular season or league championship games, stock-car races and golfing competitions. Even sporting events in other jurisdictions can offer marketing opportunities: while attending the BIO 2006 event in Chicago in April, a group of Florida communities hosted site selection consultants for a Chicago Cubs baseball game in a private box.
Similar tactics are employed, albeit with different sports, by economic development and investment promotion agencies around the world. Beyond showing visitors a good time, though, are there any tangible pay-offs? Probably not in the short term.
“I am not aware of any corporate executives whose location choices were influenced in any identifiable way by major sporting events, although I can recall Japanese investors who liked to be near major golf courses in the UK. That influenced their travel plans during site selection work, but wasn’t a big factor, as far as I know, in their final choices,” says Mr Donnelly. “I think investors keep such matters quite separate in general.”
For its European Cities Monitor 2005 report, Cushman & Wakefield Healey & Baker polled senior-level executives from more than 500 European companies and found that major international gatherings had little effect on corporate attitudes towards host cities. When asked to what extent holding a major sporting or cultural event can encourage or influence them to locate in a particular city in the future, 68% said it had no influence whatsoever and only 6% said it was a major influence.
Nevertheless, to the extent that personal relationships influence business decisions, which they surely do, sports are as a good a means as any to foster these relationships. They also offer creative ways to be memorable, just as any other hospitality events aimed at service providers and potential clients do.
“The presence of major sporting teams and events may shape business leaders’ recall and perceptions of a city, and the unity that a business community needs to develop to host a major event can also be quite valuable and attractive. But it would probably be very difficult to pin down specific companies whose leaders would admit that this was a significant factor in their business location decisions,” says Mr Donnelly.
Christopher Steele, director of Location Advisory Services at US-based Mintax, agrees. “I haven’t seen a tremendous amount of direct cause-and-effect relations between major sporting events and corporate behaviour,” he says. “However, I have seen some ancillary effects, some use of such events as a recruiting tool, and also some impact of such events on the general status of cities and regions.”
The effects on economic development and urban regeneration are often more obvious. Most Olympic host cities, for example, have used preparation for the event as a reason to fund major infrastructure projects and improvements that might not have been feasible or politically popular otherwise. For developing countries, there is even more to gain: Grant Thornton estimates that the 2010 World Cup will inject $3.4bn into the South African economy and create 159,000 new jobs.
