The NBA's strategic management process and competitive advantage

1 National Basketball Association (NBA) Strategic Management Process Introduction The National Basketball Association (NBA) is a professional men’s basketball league in North America (consisting of 29 teams in the U.S. and 1 in Canada). Founded in 1946, the Association is considered to be one of the most popular leagues in the world and is certainly of the top professional sports leagues in America. Its players and coaches are paid millions annually, its athletes become celebrities (starring in commercials and sometimes even in Hollywood films), and their shoe deals are sometimes worth more than their basketball contracts. The NBA is an organization that acts as a platform for numerous other businesses to build off of: a variety of industries intertwine with the business of the NBA—everything from marketing to apparel manufacturing to broadcasting to branding to the food and beverage industry has a hand in dealing with the NBA (Fortunato, 200). The NBA is like a bright star around which numerous other satellites orbit. This paper will describe the strategic management process of the NBA, discuss its SWOT, its competitive advantage, strategy, ethics, a case analysis and recommendations. Strategic Management Process of the NBA The NBA is headed by Commissioner Adam Silver and headquartered in New York City, where individual team offices are located. It consists of 30 teams, all of which fall under the NBA Entertainment and NBA TV studios domain, which have their offices in New Jersey. The strategic management process of the NBA is focused on utilizing these 30 teams to develop the Association’s goals, analyze areas for growth and areas that need to be addressed; formulate strategies for growing and addressing issues, implementing the strategy and evaluating and controlling the outcome—in other words, a typical strategic management process (Burgelman, 1983; Daspit, Chrisman, Sharma, Pearson & Long, 2017) just applied to the business side of the NBA’s many and diverse activities. For the NBA, the strategic management process begins with understanding what its customers want. These are the viewers and fans of NBA: they buy the jerseys of their favorite players, purchase tickets to the games, hang posters on their walls, buy memorabilia, watch the games on TV, buy the shoes, the DVDs, the art, and so on. Knowing what these fans what is the centerpiece of the NBA’s strategy for determining what goals in needs to achieve in the coming years. Implementing this strategy has allowed the NBA to grow and develop substantially over time. As Sun (2015) puts it, “the essence of an enterprise’s profits is a game with customers, and how to use its existing resources to create its own value according to the needs of consumers” (p. 185). For the NBA, this essence requires to identify its “own core values and give full play to the core values of education effect in practice on the basis of understanding consumers’ hearts carefully, the motive why they buy the products, the characteristics between industries and the competition brand advantage” (Sun, 2015, p. 185). In short, the NBA’s strategic management process is rooted on linking its core values to the core values of its fans and supporters and stakeholders all over the world. How the NBA Applies SWOT The NBA applies SWOT analysis in order to determine the strengths and weaknesses of the Association as well as opportunities and threats that it faces in the coming years. Opportunities reflect chances for the NBA to grow and develop, either to enhance its core strengths and build on them or to address weaknesses. Threats are viewed as external factors that can negatively impact the Association in different ways. Some examples include policies of drug use, the “one and done” phenomenon currently being criticized in college basketball (which serves as the recruiting ground for professional sports teams), and the problem of “losing to win”—teams purposefully tanking during the season so that they can obtain a higher lottery pick and rebuild their teams for the upcoming years (Taylor & Trogdon, 2002). All external factors have to be considered carefully because they intertwine with the internal parts of the NBA. There is no real isolation between internal and external factors when it comes to strategic management and the NBA is very aware of that fact (Morden, 2016). Thus, for the NBA, managing strategy is based on implementing SWOT analysis and constructing a view of where the NBA’s strengths lie, where it has weaknesses, how these can be addressed or turned into opportunities for development, and what existential threats must be considered in order for the NBA to continue to pursue its mission and vision and support stakeholders in the Association. NBA’s Competitive Advantage The NBA’s competitive advantage can be found in its unique packaging of entertainment that is unrivaled by any other sports league or association in the world. Men’s professional basketball in the U.S. combines star talent with high-profile celebrity status with lucrative shoe and apparel designs that are popular across cultures with media entertainment, music, awards, films, advertising, and so on. The NBA’s athletes are its main product and these athletes are considered the best in the world: they inspire millions of fans year round, as news stories are just as dominant among headlines in the off-season as they during the regular and post-season playoffs when the best teams in the NBA compete for a world title. No other league in the world offers the type of entertainment value and brand value that the NBA possesses and its brand is what sets it apart and give it its competitive advantage. Berman, Down and Hill (2002) identify the NBA’s competitive advantage by stating that “tacit knowledge often lies at the core of sustainable competitive advantage” and in the case of the NBA what is found is that there is “a predicted positive relationship between shared team experience and team performance that declines as shared experience grows, eventually becoming negative” (p. 13). In other words, the NBA develops its brand by sharing knowledge obtained among its teams, but through the process of sharing, the uniqueness or competitive advantage obtained is weakened, and a new evolution of acquiring uniqueness must be developed simultaneously as the Association works to secure its foothold in the market by maintaining the image of its league being the premier basketball league around the world. Strategy that is Employed The strategy employed by the NBA is consistent with the Blue Ocean Strategy of Kim and Mauborgne (2005) in which a company evaluates a market, looks to see what competitors are not doing and then asks questions about why they are not doing those things or attempting to appeal to the market in those ways. The NBA’s brand value and approach to providing athletic entertainment for audiences and fans around the world is different from any other leagues in that it has developed a unique culture that is diverse, inclusive, and wide-ranging in terms of appeal. The NBA has essentially strategized its approach to management by looking to see what it could offer to fans that no one else was doing: it identified shoe apparel as a unique tool to develop brand awareness, film and celebrity status that could be integrated to develop the brand and increase visibility and followings, standards of play that would ensure only the best athletes could compete at this level, and policies regarding what type of behavior would be accepted on and off court. Unlike the NFL which has struggled recently with managing its brand, its players, and its image, the NBA has succeeded in continuing to give its fans exactly what they wanted—what no one else was giving them—and that can by applying the Blue Ocean Strategy, which holds that there are many types of consumers in the “deep blue oceans” of the world, so there is no need to try to compete for always the same consumers. The NBA can appeal to people who enjoy all types of different things—and many different celebrities will often be seen courtside at games (which is another unique aspect of the NBA—it invites its fans to be up close and personal with the action on the floor). So for example, one might see Drake at one game and Jack Nicholson and Justin Bieber at another: there is massive wide-spread appeal that the NBA knows how to leverage to attract many different types of consumers to the games. It can focus on leveraging the athleticism of its teams and players, the star/celebrity power of its teams and players, the entertainment value of its teams and players, the spectacle of it tournaments, and so on. In short, the NBA’s management strategy is based on doing what no one else in the industry is doing and building its brand among consumers who appreciate the unique ways that the NBA offers entertainment value. Nature and Triggers of Strategic Change The nature and triggers of strategic change with respect to the NBA are found in concepts related to culture and communication. The two biggest triggers of strategic change in the NBA stem from the shared knowledge identified by Berman et al. (2002) regarding how teams in the NBA communicate with one another and how the Association uses that information to guide the league. Culture and communication play a pivotal role in shaping that guidance, as the culture of the consumer-base is broadly defined and considerably diverse. The trigger of change is therefore the cultural values that are asserted across the globalized world: these triggers are communicated instantly thanks to developments in technological communication—i.e., social media, which is a new development that obliterates the distance between star players and fans (Filo, Lock & Karg, 2015). Scott (2002) defines the nature of this change process as being based in Open Systems Theory, which holds that an organization is impacted and altered by the environment in which it is situated: external factors interact with the organization’s internal aims and objectives, communicate with them, and change the shape and direction of those objectives over time. This is consistent with the strategic change process seen in the NBA. The nature of its triggers are both cultural, which means that the ideals and values of society which change over time impact the strategy of the NBA in that the management direction of the Association must change to reflect the cultural values of the society and fans who support the NBA. Ethics and Leadership Principles to Strategizing The ethics and leadership principles involved in the strategizing process of the NBA include 1) community awareness, 2) integrity, 3) and global awareness. Under former Commissioner Stern, the leadership principle was “Think Global, Act Local”—an approach to management that allowed the NBA to connect both with the values of the global community and connect with the local, domestic community by appealing to the ethics and ideals of each segment (Rifkin, 1997). The ethical emphasis on integrity has also been an important aspect of the NBA’s strategizing over the years, especially as issues come up regarding the behavior of players, managers and owners. One particular case of how ethics and leadership apply to the strategizing of the NBA in managing its brand, products, and consumer base relations was seen recently in the case of Los Angeles Clippers owner Donald Sterling, a white owner who was recorded by his Asian girlfriend using ethnic slurs to describe his black athletes. The scandal that erupted threatened the face of the franchise and the NBA under current Commissioner Silver was quick to react and illustrated the principles of leadership and integrity that are crucial to the management of the brand: Silver banned Sterling from the NBA for life and showed how important community, respect and honor among owners, athletes and fans is to the NBA, which then moved forward quickly to replace Sterling and find a new owner of the Clippers. Case Analysis The case analysis of how the NBA managed the Donald Sterling scandal is an appropriate way to see how the Association applies strategic management techniques to direct its operations and effectively manage its brand and image. As Cramer (2017) points out, this case involved the interaction between whiteness and socio-political notions within the external and internal environments of the NBA regarding the acceptable use of words in communications. The fallout from Sterling’s abusive and racist language prompted players, fans, coaches and the Commissioner of the NBA to express their outrage at the owner’s remarks and insensitivity to the ethnicity of so many of the NBA’s loyal fans and athletes. The NBA expressed zero tolerance for such insensitivity and quickly moved to have Sterling ousted from ownership, banned for life from the NBA, and stripped of all relationships with the Association. The action was swift and precise and Commissioner Silver wasted no time in siding with the players and coaches, particularly with the Clippers’ African-American coach Doc Rivers who protested vehemently against Sterling’s continued ownership of the club (Cramer, 2017). The end result was that the NBA was able to maintain its integrity even in the face of this scandal, as it made no delays about giving voice to what type of behavior was deemed acceptable by its owners and representatives and what type of action would be taken when violations such as Sterling’s flagrant and disrespectful use of language occurred. The NBA was quickly able to repair its image by replacing Clippers’ ownership with a new set of owners who were more respectful of the organization, its players, its fans and its culture. Indeed, the NBA has a long history of acting swiftly to address issues that threaten its brand or image and it is known to impose hefty fines on player, coaches or owners who engage in abusive and degrading activities either while playing or off-court. Fighting, for example, is not tolerated and even engaging in any form of disrespectful behavior on court will earn a player a substantial fine. As with the case of Donald Sterling, the NBA shows that it will not be lax when it comes to maintaining a culture of integrity throughout the organization as this culture is what ties the Association to its fan base and allows it to maintain its premier status throughout the world. Recommendations The NBA should continue to exercise strategic management of its culture and communications, using social media to effectively relate to fans, athletes, coaches, owners and stakeholders around the globe. Building its brand day after day and year after year is an integral part of the strategy that the NBA must continuously develop. As the social and political environment is constantly changing, the NBA must be very vigilant about how external factors are impacting the internal forces of the Association. One case in point for comparison is the issue of kneeling in protest during the National Anthem that plagued the NFL all last year. In the NBA there were no discernible flaps or issues because the internal forces were effectively managed by applying the right strategy of harmonizing the external culture with the internal aims and disciplinary measures wielded by Silver and the NBA. Players need to know that their voices are supported, and, as they are the voices of franchises and the faces of the NBA, management must be respectful of their opinions and rights while at the same time ensuring that no one does anything to offend stakeholders or damage the brand or its image in the eyes of consumers of various backgrounds, political affiliations, ethnicities, principles, values and ethics. By focusing on always building bridges and maintaining control of the internal environment and culture, the NBA can be certain of developing a powerful brand well into the future. Conclusion The NBA is a well-managed organization that uses strategic management principles effectively to identify goals, develop pathways to achieve them, review them and control outcomes. The NBA is devoted to developing a positive culture that reflects the values of its stakeholders and must continue to be aware of how the external culture is changing so that it can reflect its changes in terms of its internal objectives. In doing so, the NBA will remain culturally relevant and strategically positioned to fill a gap that no other league has yet to fill when it comes to this style of athletic entertainment.