SEU Wk 1 1 Corporate Strategy and Diversification Case Study Questions


Critical Thinking: Corporate Strategy and Diversification (105 points)

Corporate diversification strategies raise a wide range of strategic management issues. For this week’s critical thinking assignment, read the case study found in your textbook: Case 16: Manchester City: Building a Multinational Soccer Enterprise, p.554 (in the textbook). 

Remember, a case study is a puzzle to be solved, so before reading and answering the specific case and study questions, develop your proposed solution by following these five steps:

Read the case study to identify the key issues and underlying issues. These issues are the principles and concepts of the course module, which apply to the situation described in the case study.

Record the facts from the case study which are relevant to the principles and concepts of the module. The case may have extraneous information not relevant to the current module. Your ability to differentiate between relevant and irrelevant information is an important aspect of case analysis, as it will inform the focus of your answers.

Describe in some detail the actions that would address or correct the situation.

  1. Consider how you would support your solution with examples from experience or current real-life examples or cases from textbooks.
  2. Complete this initial analysis and then read the discussion questions. Typically, you will already have the answers to the questions but with a broader consideration. At this point, you can add the details and/or analytical tools required to solve the case.
  3. Case Study Questions:
  4. Under what circumstances can a company extend its competitive advantage from its home market to an overseas market? Issues concerning the transferability and replicability of the firm’s competitive advantage are critical here.
  5. What are the distinctive features of City Football’s strategy? What mode of foreign market entry should City Football adopt? Why? Again, issues of resources and capabilities and the need for local market knowledge, distribution, and political and business connections become critical here.

What criteria can companies apply in deciding what new diversification to pursue and which should City Football apply in deciding?

What changes in the financial structure, organizational structure and management systems would you recommend?


Case 16
Manchester City:
Building a
Soccer Enterprise
In August 2008, Manchester City Football Club (MCFC) was acquired for £210 million
(€262m) by Sheikh Mansour bin Zayed Al Nahyan, a businessman and member of
Abu Dhabi’s ruling family. The change in ownership marked the beginning of a new
era for Manchester City and its long-suffering fans. Between August 2008 and January
2018, Manchester City spent £1,350 million on acquiring new players and £250 million
on new facilities—a level of investment unmatched by any other European club. In
2012, MCFC was crowned champion of the English Premier League—the first time in
44 years—and from 2012 to 2018, it was the most successful club in British soccer.
However, the rise of Manchester City has not simply a story of a super-star team built
on Middle Eastern wealth. Between 2008 and 2018, Manchester City’s owners created
an organizational structure and management system that was unlike that of any other
soccer club. City Football Group Ltd. (CFG) was formed in May 2013, initially to take
ownership of MCFC, but also to act as a holding company for a global portfolio of
football investments. By 2018, CFG had equity stakes in six football clubs on five continents, alliances with seven other football clubs, and a management system for leveraging these relationships. The key question, both for CFG and for those football clubs
that lacked such scope, was: could such a global portfolio, backed by an international
management system, really enhance the competitiveness of the individual soccer clubs?
Manchester City Football Club
MCFC was founded in 1894, but for most of its history lived in the shadow of its neighbors, Manchester United. In 2007, former prime minister of Thailand, Thaksin Shinawatra, purchased the club but, amidst intensifying legal difficulties, he sold the club to
Sheikh Mansour in 2008.
Mansour, who had been considering the purchase of an English Premier League
club for several years, was attracted to Manchester City because of its location, its history, its new stadium (built with government finance to host the Commonwealth Games
in 2004), and the real estate potential of the derelict land surrounding the stadium.
In addition, Abu Dhabi’s national airline, Etihad, had started flying to Manchester in
2006 and was considering expanding its presence there.
From the outset, it was clear that Mansour was a hard-headed investor rather than
an indulgent football enthusiast. At the same time, Mansour’s vision for MCFC was
not limited to financial return—he was inspired by FC Barcelona whose emphasis on
This case was prepared by Robert M. Grant. ©2019 Robert M. Grant.
values, youth development, and community involvement, as well as its artistic, attacking football, had conferred upon it a unique status as a club.
With Mansour’s business partner, Haldon Al Mubarak, installed as chairman of
MCFC, the initial stages of a turnaround program were implemented:
New players. Beginning with the purchase of Robinho for £32.5 million, MCFC
invested £188 million in players and other assets during the first year under the
new ownership. By the end of the 2011–12 season, £452 million ($695 million)
had been spent on acquiring 22 new players (at an average price of £22 million).
● New coaches. In seeking a coaching staff capable of integrating MCFC’s
star-studded squad into one of Europe’s most successful teams, Mansour and Al
Mubarak employed a succession of internationally experienced coaches with
successful track records: Mark Hughes ( June 2008–December 2009), Roberto
Mancini (December 2009–May 2013), Manuel Pellegrini ( June 2013–June 2016),
and Pep Guardiola (from July 2016).
● Facilities. Soon after buying MCFC, Mansour and Al Mubarak began planning
a fully integrated training, entertainment, and administrative complex alongside
the stadium. Brian Marwood, a former Arsenal player and Nike executive,
designed the new training facilities by adopting the best features of other clubs’
facilities and drawing, in particular, on AC Milan’s Milanello training complex.
The Etihad Campus was opened in 2014. It housed training facilities for all
the club’s teams, from age-group sides to men’s and women’s senior squads.
It included 16 football pitches, a 7000-seat stadium for academy and women’s
teams, a 50-seat auditorium for reviewing video, 4-star accommodation for
players and their families, retail stores, and CFG’s administrative headquarters.
The first-team’s facilities feature a hypoxic chamber where players can run at
altitude or in extreme temperatures, a hydrotherapy area for treating injuries,
and a hydro treadmill with underwater cameras. The complex also accommodates the Beswick Community Hub whose facilities include a leisure center for
local residents, a sixth form college, and the Manchester Institute of Health and
Performance. The addition of a third tier to the South and North stands of the
main stadium increased its capacity to 61,000.

City Football Group Ltd.
The Abu Dhabi United Group, which Mansour created as a vehicle for acquiring MCFC,
became its parent company. However, Mansour’s interests in football were not limited
to Manchester City. By 2012, he was already looking elsewhere for investment and
development opportunities. To manage these interests, City Football Group Ltd. (CFG)
was created as a holding company, headquartered at Manchester City’s Etihad campus,
to manage Abu Dhabi United Group’s worldwide footballing investments.
Internationalization began in 2013 with in the creation of a new US Major League
Soccer franchise—New York City FC. Manchester City executives pioneered the
initiative and CFG took an 80% equity stake. In 2014, CFG acquired the Australian
A-League club, Melbourne Heart (which was renamed Melbourne City FC), a 20%
stake in Japan’s Yokohama F. Marinos, and Club Atlético Torque in Montevideo, Uruguay. In 2017, Girona FC in Spain’s La Liga was acquired. Table 1 shows the football
clubs owned by CFG and those with which the CFG has co-operation agreements.
Clubs owned by or allied with City Football Group
Manchester City
FC (England)
Acquired in 2004. Average home attendance 53,600 (women’s team
2300) Three-time winners of Premier League since 2010.
New York City FC (US)
Founded in 2014 with CFG holding 80% equity. Finished 2nd In Eastern
Conference In 2017. Average attendance 23,000.
Melbourne City
FC (Australia)
Acquired in 2014, became wholly owned in 2015. Has finished in
top 5 of A-league during past 3 seasons ((2015–17). Average
attendance 10,700.
F. Marinos (Japan)
20% equity stake acquired in May 2014. The remaining 80%
owned by Nissan Motor Co. Plays in Japan’s J1 league. Average
attendance 24,000.
Club Atlético
Torque (Uruguay)
Acquired by CFG in March 2017. Promoted to Uruguay Primera
Division in 2017.
Girona FC (Spain)
44.3% acquired by CFG in August 2017. Another 44.3% held by Girona
Football Group, led by Pere Guardiola, the brother of Pep Guardiola.
Promoted to La Liga in 2017.
NAC Breda (Netherlands)
Agreement to loan youth players—primarily to gain EU citizenship
Long Island Rough
Riders (US)
Agreement with New York City FC to assist in player development
San Antonio FC (US)
Agreement with New York City FC to co-operate on training, scouting,
and player loans
Atletico Venezuela
Agreement with CFG to share scouting data and provide coaching
support. Atletico midfielder Yandel Herrera signed for Man City and
was loaned to New York City FC
CF Pearled
Feeder club for Girona FC
Ghana Football Association
Training collaboration. Also, CFG has agreement with the Right to
Dream Academy in Accra, Ghana, for recruiting its graduates
In creating a multiteam, multinational enterprise, CFG is unusual in football (and in
most other professional sports). Historically, football clubs—like most sports clubs—
were local in their fan base, their players, and their sources of finance. When Glasgow
Celtic won the European Cup in 1967, all the players and the manager had been born
within 30 miles of the stadium, and the club’s owners were also from Glasgow. But
since then, the teams, their fans, and their financing have internationalized. In English
football, the new owners came from Russia (Roman Abramovitch and Chelsea, Maxim
Demin and Bournemouth), the United States (Malcolm Glazer and Manchester United,
John Henry and Liverpool, Steve Kaplan and Swansea), and China (Gao Jisheng and
Southampton, Guochuan Lai and West Bromwich Albion).
CFG was not the first sports enterprise to own clubs in different countries: Stan Kroenke
is majority owner of Arsenal and the Colorado Rapids; Vichai Srivaddhanaprabha owns
both Leicester City and OK Leuven. The soft drinks company Red Bull owns football
clubs in the United States, Brazil, Germany, and Austria. However, CFG is unique in
creating a multinational operating company to run its football clubs, the principal
activity of which is “the operation of professional football clubs as well as providing
football and commercial services to other organizations.”1 In operating different clubs
in different countries, CFG has sought to create a common identity for its clubs. This is
evident in the naming of its three principle clubs as “City Football Club” and its choice
of sky blue for its teams’ strip.
This common identity extends beyond a unified brand presence. CFG has also
promoted the “City Way,” a concept whereby all the City teams adopt a style of football based on passing, possession and a commitment to attack. This style of play was
developed at Barcelona and then transferred to MCFC by its team manager Pep Guardiola and CEO Ferran Soriano. The same style of football is practiced not only in the
various CFG first teams but also women’s and academy teams right down to the youngest age groups. In April 2015, Soriano outlined the City approach:
There is a core of values, a core of beliefs that we all have. We win and we lose, but
we never leave these values. We always play attacking football, we try to keep the
ball, we play with a high defensive line and we apply pressure to recover the ball.
These are very simple things that all our teams do and, hopefully, when you see our
teams in Melbourne and Manchester play and you will see the same kind of football.
This doesn’t mean we’ll win. At the weekend, Manchester City had 73 per cent possession in a game we lost. But we never, ever renounce our values of the way we
play football … because all organizations need some set of basic values that people
believe in.2
The Management Team
Although Mansour is the majority owner of CFG (through his ownership of its parent
company, Abu Dhabi United Group), he has no formal role in the management of CFG
or its member clubs. The key executives within the group are shown in Table 2.
CFG’s business model has been shaped primarily by the vision of Soriano. While at
FC Barcelona, he developed the concept of a football organization with the capability
to build a highly successful team while also creating shareholder value. Central to this
concept was a global brand and a global system for sourcing and developing players.
At a presentation at Birkbeck College, London, in February 2006, Soriano outlined his
vision for turning FC Barcelona into a “global entertainment brand” through product
management, human resource development, cost control and value chain management,
revenue growth, and globalization.3 However, it was CFG that was to give Soriano the
opportunity to realize that vision.
Player Sourcing, Assessment, and Development
At the heart of CFG’s approach to combining team success with financial success is
its global system for finding and nurturing world-class players. Early on, Soriano recognized that UEFA’s new financial fair play rules (introduced in 2009) meant that the
old “benefactor model” of clubs being bankrolled by billionaire owners was no longer
viable. A major implication of the new rules was that clubs could no longer rely on
recruiting superstar players at vast expense—they would have to grow their own talent.
Key members of CFG board and executive team
Khaldoon Khalifa Al Mubarak, Chairman
and CEO, CFG; Chairman of MCFC
(also CEO of Mubadala Development
Co., an Abu Dhabi state-owned
investment company)
Born in Abu Dhabi 1976. Educated at Tufts University.
Appointed to Abu Dhabi Executive Council.
Trusted adviser to the Abu Dhabi royal family.
Li Ruigang, CFG Board Member; Chairman of
China Media Capital
Born in China, 1969. Created China’s most global
media company, China Media Capital, which owns
16% of CFG. Regarded as “China’s most connected
media mogul.”
Martin Edelman, CFG Board Member, vicechairman NY City FC
US lawyer specializing in international law and real
estate development.
Simon Pearce, CFG Board Member, Vice
Chairman Melbourne City FC
Business associate of Mansour and Al Mubarak, who
worked for Abu Dhabi government to build the
Abu Dhabi brand, develop tourism, and attract
business partners
Ferran Soriano, CEO of CFG, also
Born in 1967 in Barcelona, Spain. After a career
in consumer goods management consulting,
elected vice president and CFO of Barcelona FC in
2003, then resigned in 2008. CEO of MCFC from
August 2012.
Pep Guardiola, Team Manager, MCFC
Born in 1971 in Catalonia, Spain. Played as midfielder
for Barcelona FC and Spain. Coach at Barcelona
(2007–12) and Bayern Munich (2012–16).
Patrick Vieira, Football Development
Executive 2012–15; Head Coach New
York City FC 2016–18
Born in Senegal, 1976. Playing career spanned
Arsenal, Inter Milan, MCFC. At MCFC responsible for youth development and Community
Brian Marwood, Managing Director, City
Football Services (since October 2015)
Born in 1960 in Durham, England. Played for
Sheffield Wednesday and Arsenal. Marketing
Manager for Nike, then Director of Football at
MCFC (2008–12) and in charge of developing
its academy.
For CFG, one of the key drivers of globalization was the priority given to locating
young talent, wherever it might be in the world. By owning multiple clubs and having collaborations with other clubs across the world, CFG is reckoned to have the
world’s biggest and most effective talent-spotting network. Its international spread
alleviates some of the problems of work permits and immigration restrictions that
bedevil professional football. This international scope also increases CFG’s appeal to
young talent: “The fact that the CFG’s tentacles stretch so far makes it easier to attract
young players particularly, because recruitment staff can make the case that if life
does not work out for them in Manchester, they might later find their level in other
appealing cities.”4
In terms of scouting, CFG’s global network represents a massive extension in the
talent-finding capability of the individual clubs. In 2014, CFG employed 36 scouts, of
whom 14 were based in South America. Announcing CFG’s acquisition of Club Atlético
Torque and agreement with Atletico Venezuela, Soriano observed:
The investment in CA Torque enables our organization to build on existing connectivity in Uruguay and helps to expand the options for identifying and developing local
and South American talent. This move also provides us with an administrative hub for
our pre-existing scouting operations in the region and provides a footprint for City
Football Group in South America. I am also delighted to start a working partnership
with Atletico Venezuela to the benefit of both clubs. The collaboration agreement
allows us to share knowledge, insights and hard data, all of which enables us to further
complement and increase our scouting and recruitment operations on the continent.5
Two players exemplify the merits of CFG’S global approach to player assessment
and deployment.
Yangel Herrera was signed by MCFC from its affiliate, Atlético Venezuela, in
January 2017 for about £1.7 million and immediately loaned to New York City
FC, where he became one of the stars of the team. During 2018, CFG will assess
Herrera’s performance and prospects and determine whether he stays at New
York City, joins MCFC, or is sold to another club.6
● Bruno Fornaroli captains Melbourne City FC. Despite his early promise in
Uruguay’s top youth team, his subsequent performance in both Italian and
Greek leagues was disappointing. However, back in Uruguay and aged 27, a
report from one of CFG’s scouts recommended a fuller analysis of Fornaroli.
On the basis of additional analysis, CFG acquired Fornaroli’s registration for
Melbourne City FC. At Melbourne, Fornaroli became the club’s leading goal
scorer and has also won most of the A League’s individual awards.7

Having different teams in different countries helps player development. Soriano
refers to a “development gap” that is especially problematic for English clubs. “If the
player is top quality, he needs to play competitive football to develop. It’s not only for
the technical aspect of the game, but also for the pressure. The under-21 or under-19
competitions in England don’t provide this, because games aren’t in front of a lot of
fans and there isn’t enough competitive tension.”8 However, in Europe, clubs such as
Barcelona, Real Madrid, and Bayern Munich all have reserve teams that play in their
countries’ second or third division against other professional clubs—not in a separate
league, as English youth teams do. Hence, according to Academy chief, Brian Marwood, the importance to MCFC of loaning its young players to other clubs: “We did
some research last year and discovered that in the last 10 years, 83% of players who
featured in the quarter-final stage of the Champions League had played first team football at 17 … That’s why you’ll find more than 30 Blues on loan …”9
CFG’s investment in its academies has centered on its Manchester campus, where
its training and youth development facilities are reckoned to be among the best in the
world. However, in 2015, a new academy was unveiled at Melbourne City FC, and in 2018
New York City FC opened its new academy. The features of both were based on those
of the Manchester academy and both were designed by the same architect, Rafael Viñoly.
Inspired by the tradition of FC Barcelona and its renowned La Masia academy, CFG
placed a massive emphasis on youth development. According to Academy director,
Mark Allen:
Our focus remains on style of play. Every single side, from the under-nines right up
to the elite development squad team, play the game in the same way … Coaches
focus on the technical and tactical side of the game as soon as a youngster joins the
academy, with the physical development seen as secondary … Last season saw success at almost every level. The under-10s became national champions … The under13s are national champions. The under-15s are the Floodlit Cup national winners. And
the under-18s reached the FA Youth Cup for the second consecutive season.10
CFG’s commitment to youth development is apparent from the Group’s investment
in facilities for its younger teams at the Manchester Academy: “Two-thirds of the 16.
pitches on site are primarily used for youth football, and the wider development of the
young players is supported by tailored coaching and education facilities, medical and
sports science services, sleeping accommodation and parents’ facilities.”11A common
style of football (“The City Way”) assists young players to rise up the hierarchy. In
addition, youth development takes a holistic approach: City’s academy collaborates
with a local independent school, St. Bede’s, which allows City’s youth players to enroll
on an integrated football and education program designed by the club and the school.
CFG’s involvement in developing young players is also apparent in the residential
soccer camps offered by its member clubs (including MCFC’s intensive football and
language immersion program) and its joint venture with Goals Soccer Centres PLC to
develop a chain of dedicated, five-a-side pitches and training facilities across North
America. The sites will be jointly City and Goals branded, with the new identity to be
launched later this year.
Information technology has had a huge impact on football management over the past
decade. Although statistical analysis has long been applied in training, team selection,
and recruiting in US professional sports,12 its application to soccer was delayed by the
intensely interactive nature of the game. In English football, Bolton Wanderers FC was
an early convert to data analytics—it was there that Gavin Fleig, who would become
head of performance analysis at MCFC, gained early experience.
Following the Mansour takeover, data analysis has played a growing role in team
performance at MCFC. Initial applications included postgame analysis using the
detailed player tracking data supplied by Opta and Prozone and player recruitment.
Under Brian Marwood (MCFC Director of Football, 2008–12), player recruitment relied
increasingly on quantitative data. For youth recruits, 30-page, color-coded reports were
the norm, while for major signings, the dossiers would run to 40 or 50 pages.13
In 2015, CFG signed a partnership agreement with SAP to use SAP’s cloud and analytics technology across its backroom operations and on-field activities, and replaced
CFG’s paper-based systems with SAP’s cloud-based system. The SAP platform includes
components for team management, training, player fitness, and performance analysis,
all of which can be used to customize training, create tactics, and create individual
player development plans. SAP’s software for postmatch analysis integrates Opta and
Prozone data. In monitoring youth squads, the system integrates videoed coaching
sessions, GPS data, biometrics including heart rate, and sleep data.14
Digital technology also plays a growing role both in deepening the City clubs’ relationships with their fans and in expanding the fan base. CityTV creates video content
for all the City clubs, which is then distributed via the Web, mobile apps, and different social media platforms. In addition, CFG has been a leader in launching enhanced
game-viewing through providing real-time analytics, chat bots, hackathons, and virtual
reality—including participation in eSports.15
In terms of generating commercial revenues—licensing, sponsorship, and retail sales—
MCFC has lagged far behind its cross-town rival, Manchester United, long regarded as
football’s most commercially successful club. In 2006/7, MCFC’s commercial revenues
were £14.1 million; Manchester United’s were £56.1 million. Building MCFC’s commercial
revenues initially involved other Abu Dhabi businesses. In July 2011, MCFC announced
a £400 million sponsorship deal with Etihad Airways that covered 10-year naming rights
for the stadium and financial support for MCFC’s Etihad Campus. This was followed in
2013 by a six-year kit sponsorship deal with Nike worth £72 million ($109 million).
With the creation of CFG, marketing was established as a global unit—City Football
Marketing—based in its own London offices in order to allow the different clubs to
access the same marketing assets. Omar Berrada (Commercial Director of City Football
Marketing, 2015–16) emphasized the benefits to clients from the global approach CFG’s
family of clubs offered: “It allows brands to have the best of both worlds: a consistent
global marketing platform in terms of the assets and inventory they can use to engage
with our fans, as well as the ability to deliver messages that are very specific to the local
markets of our clubs around the world.”16
In 2014, Nissan entered into a global marketing relationship with CFG when it
became the official automotive partner of all four City clubs. Similarly, Etihad Airways
extended its kit sponsorship of Manchester City to include both New York City and
Melbourne City.
Community Involvement and Corporate Social Responsibility
Despite the efforts to create a unified, global, brand presence for the City clubs and to
agree with global sponsorship and licensing deals, Tom Glick, President of New York
City FC (previously Chief Commercial and Operating Officer for MCFC), stressed that
it was vital to sustain and build the individual character of each club, in a way which
respects the tribal loyalties of each fanbase: “… the most important thing is that each
one of our clubs is connected to its local city and the fans of that city.”
To build engagement, the CFG clubs have sought to involve fans in club decisions.
In both New York and Melbourne, fans participated in the design of the new club
badges. In Melbourne, this resulted in the inclusion of the city’s municipal flag in
the design.17
CFG’s emphasis on developing and exploiting its global reach has been balanced
with close attention to the cultivation of the local fan base of its clubs and responsibility
to the local communities within which its clubs are located. As a result, CFG has been
able to avoid the hostility directed by the fans of Manchester United, Liverpool, and
Hull City toward the foreign acquirers of their clubs.
At MCFC, CFG has worked closely with Manchester City Council in its development
strategy for the club. This was mandated by the City Council’s ownership of the stadium
and the need for CFG to obtain planning permits for developing the Etihad complex
and other real estate developments adjacent to the stadium. More generally, however,
CFG and the City Council have viewed themselves as partners in developing an economically depressed area of Manchester, while also providing opportunities for additional investment by Abu Dhabi in the city (e.g., increased flights by Etihad Airways
from Manchester Airport).
As one fan observed: “The other major benefit [of CFG’s ownership of MCFC] is the
vast improvement in the area around the stadium. This was largely a toxic, deprived
and neglected post-industrial area prior to the arrival of the Abu Dhabi owners and
much money and work has gone into transforming it, with a lot more regeneration still
on the cards. This is all being done within the framework of a strategic partnership
with the city council.”18
Organizational Structure
Fundamental to CFG’s strategy has been the notion that competitive advantage in
professional football can be achieved simply through the application of standard
business principles to the often-chaotic and personalized world of football club
management. Following the acquisition of MCFC, Al Mubarak remarked: “One of the
big surprises was how amateurish it was … I found it shocking in the famous Premier
League, to be without such basic functions.”19 A key feature of CFG’s introduction of
professional management to MCFC was creating an organizational structure that was
consistent with its corporate strategy.
The structure of CFG embodies two distinctive characteristics. First, there is a consistent organization structure for all the member clubs. At each of the City clubs, there
is a CEO (or President), a Director of Football, a Technical Director, and a Head Coach
(or Team Manager at MCFC), and then there are directors for communication, operations, community relations, and other areas; Al Mubarak is Board Chairman. Second,
CFG is organized around different functional areas that provide support for the different
clubs. CFG’s academies and technical services to its members’ clubs are provided by a
subsidiary of CFG, City Football Services Ltd., headed by Brian Marwood. In May 2016,
City Football Services had 63 employees. Marketing services are provided by City Football Marketing Ltd., whose “services include partnership sales and activation, content
production and distribution, retail and licensing and fan relationship management for
all of CFG’s clubs.”20 In May 2016, City Football Marketing had 92 employees. Figure 1
shows the ownership structure of the CFG. Figure 2 shows its management structure.
City Football Group Ltd.: Group structure
Abu Dhabi United Group
China Media Capital/CITIC Capital (13%)
City Football Group Ltd.
Chairman: Al Mubarak
CEO: Ferran Soriano
City Football Services Ltd.
CEO: Brian M
Manchester City FC Ltd.
CEO: Ferran Soriano
COO: Omar Berrada
New York City FC LLC
CEO: Jon Patricof
City Football Marketing Ltd.
CEO: Tom Glick
Melbourne City FC Ltd.
CEO: Scott Munn
Yokohama F. Marinos
Girona FC
Club Atlético Torque
City Football Japan
City Football Singapore
City Football China
City Football Group Ltd.: Corporate management team
Board of Directors
Chairman: Al Mubarak
CEO: Ferran Soriano
Simon Cliff
Tom Glick
Andy Young
Nuria Tarre
Vicky Kloss
Managing Director
City Football
Brian Marwood
Senior VP
Managing Director
Emerging Clubs
Diego Gigliani
Director of
Don Dransfield
The finance to MCFC and CFG made available by Mansour through his Abu Dhabi
United Group has allowed both companies to rack up massive losses while not taking
on any debt. Table 3 shows CFG’s financial results. Table 4 and Figure 3 shows MCFC’s
financial performance.
City Football Group Ltd.: Financial Data
—Broadcasting: UEFA
—Broadcasting: other
—Other commercial activities
Operating profit (loss)
Net profit (loss)
Property, plant, equipment
Intangibles and other noncurrent assets
Current assets
Total assets
Current liabilities
Noncurrent liabilities
Shareholders’ equity
Cash flow from operating activities
Cash flow from investing activities
—of which, transfer fees less receipts
Source: City Football Group Limited: Directors’ Report and Financial Statements.
13 months to end-June 2017.
Operating loss before profit on disposal of player registrations was £105.7.
Manchester City Football Club.: Financial Data (£ millions)
—Broadcasting: UEFA
—Broadcasting: other
—Other commercial activities
Operating profit (loss)
Tangible fixed assets
Intangibles and other noncurrent assets
Current assets
Total assets
Current liabilities
Noncurrent liabilities
Shareholders’ equity
Total number of employees
—of which, football staff (including players)
Net profit (loss)
Source: City Football Group Limited: Directors’ Report and Financial Statements.
13 months to end-June 2017.
Operating profit before loss on disposal of player registrations was £91.6.
If the loss on disposal of players is excluded, net profit would have been £88.3.
The only external financing used by CFG $40 (£265 million) in December 2015 from
the sale of 13% of CFG to a consortium of Chinese investors led by Chinese media
giant China Media Capital and its chairman, Ruigang Li. This valued CFG at $3 billion.
The deal was seen as an opportunity for CFG to partner with China Media Group in
exploiting the huge potential market for football in China.
FIGURE 3 Manchester City Football Club Ltd.: Revenue and profit (financial years
ending May 31)
Revenue (£m.)
Net profit (£m.)
Although chairman Al Mubarak has claimed that CFG’s global model has been a
means of reconciling world-class team performance with sound financial performance,
other European clubs have complaine

MGT 401 SEU Competitive Advantage SWOT & Performance Case Study


Finding the Right Market Mix?
Alan N. Hoffman
Bentley University
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first companies to introduce robotic technology into the consumer market. Home care
robots are iRobot’s most successful products, with over 5 million units sold worldwide,
accounting for over half of its total annual revenue. iRobot also had a long-standing contractual relationship with the U.S. government to produce robots for military defense.
The company is fully gauged toward first-mover radical innovation with an extensive R&D budget. Made up of over 500 of the most distinguished robotics professionals
in the world, it aims at leading the robotics industry. By forming alliances with companies like Boeing and Advanced Scientific Concepts, it is able to develop and improve
upon products that it otherwise is incapable of obtaining solely through its own technology.
The company also has a healthy financial position with an excellent cash and long-term
debt rate.
Despite these competencies, iRobot still has serious concerns. Although the robotics
industry is not highly competitive, iRobot needs more competition to help build up the total
scale and visibility of the fledgling industry it has pioneered. Home care robots, its biggest
revenue source, is a luxury supplemental good. Times of economic recession, however, could
prove to be a problem for the sales of iRobot’s consumer goods, given that discretionary budgets are likely decreased. In addition, iRobot had over 70 patents, many of which will begin to
expire in 2019. In a rapidly advancing industry, technology can also become obsolete quickly
This case was prepared by Professor Alan N. Hoffman, Bentley University and Erasmus University. Copyright ©
2010 by Alan N. Hoffman. The copyright holder is solely responsible for case content. Reprint permission is solely
granted to the publisher, Prentice Hall, for Strategic Management and Business Policy, 13th Edition (and the international and electronic versions of this book) by the copyright holder, Alan N. Hoffman. Any other publication of the
case (translation, any form of electronics or other media) or sale (any form of partnership) to another publisher will be
in violation of copyright law, unless Alan N. Hoffman has granted an additional written permission. Reprinted by permission. The author would like to thank MBA students Jeremy Elias, Ryan Herrick, Steven Iem, Jaspreet Khambay,
and Marina Smirnova at Bentley University for their research. RSM Case Development Centre prepared this case to
provide material for class discussion rather than to illustrate either effective or ineffective handling of a management
situation. Copyright © 2010, RSM Case Development Centre, Erasmus University. No part of this publication may
be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission
of the copyright owner, Alan N. Hoffman.
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and render patents useless. Additionally, iRobot is highly dependent on several third-party
suppliers to manufacture its consumer products. It also depends on the U.S. government for
the sales of its military products. Any volatility in its supply chain or in government fiscal
policy will have grave consequences upon the company’s future.
Company History
In the late 1980s, the coolest robots in the world were being developed at the MIT Artificial
Intelligence Lab. These robots, modeled on insects, captured the imagination of researchers,
explorers, military, and dreamers alike. iRobot cofounders, MIT professor Rodney Brooks
and graduates Colin Angle and Helen Greiner, saw this technology as the basis for a whole
new class of robots that could make people’s lives easier and more fun. In 1990, iRobot was
incorporated in the state of Delaware.1
After leaving the MIT extraterrestrial labs, the three entrepreneurs focused their business on extraterrestrial exploration, introducing the Genghis for robotic researchers in 1990.
In 1998, the founders shifted their focus onto military tactile robots and consumer robots
after landing a pivotal contract with the U.S. Defense Advanced Research Project Agency
(DARPA). This contract provided funding for the necessary R&D to develop new technologies. As a direct result, iRobot delivered the PacBot to the government in 2001 to assist in
the search at the NYC World Trade Center. In 2010, thousands of PacBots were serving the
country on the war front.
In 2002, iRobot began selling its first practical and affordable home robot, the Roomba
vacuuming robot. With millions of Roomba vacuums sold, iRobot has continued to develop
and unveil new consumer robots such as a robotic gutter cleaner and a pool vacuum. In
2005, iRobot raised US$120 million in its IPO and began trading on the NASDAQ stock
iRobot’s Products and Distribution
iRobot designs and builds robots for consumer, government, and industrial use, as shown
in Exhibit 1. On the consumer robots front, the company offers floor cleaning robots, pool
cleaning robots, gutter cleaning robots, and programmable robots. iRobot sells its home
robots through a network of over 30 national retailers. Internationally, iRobot relies on a
network of in-country distributors to sell these products to retail stores in their respective
countries. iRobot also sells its products through its own online store and other online stores
like Amazon and Wal-Mart.
Home robots have been the company’s most successful products, with over 5 million
units sold worldwide. Sales of home robots accounted for 55.5% and 56.4% of iRobot’s
total revenue in 2009 and 2008, respectively.2 Currently, iRobot is exploring new technological opportunities, including those that can automatically clean windows, showers,
and toilets. The potential to fully clean one’s house using automated robots is appealing to
On the government and industrial robotics front, iRobot offered both ground and maritime unmanned vehicles, selling the vehicles directly to end-users or through prime contractors and distributors.3 Its government customers included the U.S. Army, U.S. Marine
Corp, U.S. Army and Marine Corps Robotic Systems Joint Program office, U.S. Navy EOD
Technical Division, U.S. Air Force, and Domestic Police and First Responders. For 2009
and 2008, 36.9% and 40.3% (respectively) of iRobot total revenue came from the U.S.
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Exhibit 1
iRobot Complete
Product Listing
Consumer Products:

Roomba floor vacuuming robot: vacuum floors and rugs at the press of a button
Scooba floor washing robot: preps, washes, scrubs, and dries hard floor surfaces
Verro pool cleaning robot: cleans a standard size pool in about an hour while removing debris
as small as two microns from the pool floor, walls, and stairs (US$399–US$999).
Looj gutter cleaning robot: simplifies the difficult and dangerous job of gutter cleaning
Create programmable robot: a fully assembled programmable robot based on the Roomba
technology that is compatible with Roomba’s rechargeable batteries, remote control, and
other accessories (US$129–US$299).
Government and Industrial Products:

iRobot 510 PackBot (advanced EOD configuration)
iRobot 510 PackBot (FasTac configuration)
iRobot 510 PackBot (First responder configuration)
iRobot 510 PackBot (Engineer configuration)
iRobot 210 Negotiator
310 SUGV
iRobot 1Ka Seaglider
iRobot 710 Warrior
Daredevil Project
LANdroids Project
The robot-based products market is an emerging market with high entry barriers because it
requires new entrants to have access to advanced technology, as well as large amounts of
capital to invest in R&D. As a result, the market has relatively few companies competing with
each other.
iRobot competes with large and small companies, government contractors, and governmentsponsored laboratories and universities. It also competes with companies producing traditional
push vacuum cleaners, such as Dyson and Oreck.
Many of iRobot’s competitors have significantly more financial resources. These include Sweden-based AB Electrolux, German-based Kärcher, South Korea–based Samsung,
UK-based QinetiQ, and U.S.-based Lockheed, all of whom compete against iRobot mainly
in the robot vacuum cleaning market and the unmanned ground vehicle market. The iRobot
product (for example, its Roomba vacuum robot) is not the most expensive product, but is
rated the highest across the majority of comparison points.
AB Electrolux
Founded in 1910, Electrolux is headquartered in Stockholm, Sweden. It does business in
150 countries with sales of 109 billion SEK (US$15 billion), and is engaged in the manufacture and sales of household and professional appliances. Its Electrolux Trilobite vacuum cleaner competed with the iRobot’s Roomba vacuum cleaner in international markets.
Although Electrolux Trilobite is currently unavailable in the United States, it will likely soon
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be sold on the company’s website. An Electrolux Trilobite is priced at about US$1800, much
more than a Roomba, which retails for between US$200 and US$500.
Alfred Kärcher GmbH & Co.
Founded in 1935, Kärcher is a German manufacturer of cleaning systems and equipment,
and is known for its high-pressure cleaners. Kärcher does business worldwide, with sales of
€1.3 billion (US$1.7 billion). In 2003, it launched Kärcher RC 3000, the world’s first
autonomous cleaning system, which competes with the iRobot Roomba vacuum cleaner in
international markets. Kärcher RC 3000 is not currently sold in the United States but can be
purchased and shipped directly from Germany for approximately US$1500.
Samsung Electronics Co., Ltd
Founded in 1969, Samsung is headquartered in South Korea. It is the world’s largest electronics company, with a revenue of US$117.4 billion in 2009. It is a prominent player in the world
market for more than 60 products, including home appliances such as washing machines,
refrigerators, ovens, and vacuum cleaners. In November 2009, Samsung launched Tango, its
autonomous vacuum cleaner robot, which is available in South Korea. In March 2010, the
company premiered the Samsung NaviBot, an autonomous vacuum cleaner, in Europe. It was
priced at €400 to €600 (US$516 to US$774).
Founded in 2001, QinetiQ is a defense technology company headquartered in the UK with
revenues of £1.6 billion (US$2.4 billion). It produces aircraft, unmanned aerial vehicles,
and energy products. iRobot’s stiffest competitor in the unmanned aerial vehicles market is
QinetiQ, which has 2500 Talon robots deployed in Iraq and Afghanistan. iRobot had delivered
more than 3000 PackBot robots worldwide.
Lockheed Martin Corporation
Based in Maryland, the U.S.-based Lockheed is the world’s second-largest defense contractor
by revenue and employs 140,000 people worldwide. It was formed by the merger of Lockheed
and Martin Marietta in 1995, and competed with iRobot in the unmanned ground vehicle
Research and Development at iRobot
Research and development (R&D) is a critical part of iRobot’s success. The company spends
nearly 6% of its revenue on R&D. In 2009, its total R&D costs were US$45.5 million, of
which US$14.7 million was internally funded, while the remaining amount was funded by
government-sponsored research and development contracts. iRobot believes that by utilizing
R&D capital it will be able to respond and stay ahead of customer needs by bringing new,
innovative products to the market. As of 2009, iRobot had 538 full-time employees, 254 of
which were in R&D.4
The company’s core technology areas are collaborative systems, semi-autonomous operations, advanced platforms, and human-robot interaction. Each area provides a unique benefit
to the development and advancement of robot technology. Research in these fields is done
using three different methods: team organization, spiral development, and the leveraged model.
Team organization revolves around small teams that focus on certain specific projects or
robots. They work together with all the different lines of the business to ensure that a product
is well integrated. Primary locations for these teams are Bedford, Massachusetts; Durham,
North Carolina; and San Luis Obispo, California.
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Spiral development is used for military products. Newly created products are sent into
the field and tested by soldiers with an in-field engineer nearby to receive feedback from the
soldiers on the product’s performance. Updates and improvements are made in a timely manner, and the product is sent back to the field for retesting. This method of in-field testing has
allowed iRobot to quickly improve its technology and design so it can truly fulfill the needs
of its end-users.
The leveraged model uses other organizations for funding, research, and product development. iRobot’s next generation of military products are supported by various U.S. government organizations. Although the government has certain rights to these products, iRobot does
“retain ownership of patents and know-how and are generally free to develop other commercial products, including consumer and industrial products, utilizing the technologies developed during these projects.”5 The same methodology holds true when designing consumer
products. If expertise is developed that will assist in governmental projects, it is transferred to
the appropriate team.
iRobot’s continued success depends on its proprietary technology, the intellectual skills
of its employees, and its ability to innovate. The company holds at least 71 U.S. patents,
150 pending U.S. patents, 34 international patents, and more than 108 pending foreign applications. The patents held, however, will start to expire in 2019.
Financial Results
Sales, Net Income, and Gross Margins
From 2005 through 2009, iRobot’s total revenue more than doubled, from US$142 million to
US$299 million. Revenues received from products accounted for nearly 88% of total revenue,
far greater than the remaining 12% received from contract revenue, though contract revenue
showed a record high of US$36 million by the end of 2009. (See Exhibit 2).
Revenues from 2009 showed a decline of US$9 million from 2008 that was mainly
attributable to a 6.3% decrease in home robots shipped. This decrease resulted from softening
demand in the domestic market. On a more positive note, the total US$30.9 million decrease
in domestic sales was partially offset by an increase in international sales (US$23.2 million).
Even though revenues declined in 2009, iRobot was able to control its costs and operating
expenses, resulting in an increase in net income of over four-fold, from US$756,000 in 2008
to US$3.3 million in 2009.
Cash and Long-Term Debt
iRobot is in a strong financial position regarding cash and long-term debt. In 2009, iRobot
increased its cash position by over US$31 million while decreasing the amount of long-term
debt by about US$400,000. Its cash position by the end of 2009 was US$72 million versus
US$41 million in 2010, an increase of over 77%. This put iRobot in a good position to continue investing in research and development even if sales began to slow. At the end of 2009,
iRobot’s long-term debt was just over US$4 million (see Exhibit 3). iRobot’s financial status
gives it a competitive edge, as it should be able to withstand both current and future unforeseen swings in sales, supplier issues, and the cancellation of government contracts.
iRobot’s promotion strategies vary by product group, but neither its defense product group nor
its home care product group utilize television or radio advertising. Since defense products are
produced solely for the U.S. government, promotion is unnecessary. Home care products, on
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Exhibit 2
Consolidated Statement of Operations: iRobot Corporation (Dollar amounts in thousands)
January 2,
Year Ending
Product revenue
Contract revenue
Total revenue
Cost of revenue
Cost of product revenue
Cost of contract revenue
Total cost of revenue
Gross margin
Operating expenses
Research and development
Selling and marketing
General and administrative
Litigation and related
Total operating expenses
Operating (loss) income
Net income
Net income attributable to
common stockholders
Net income per common share
Shares used in per common
share calculations
December 27,
December 29,
December 30,
December 31,




the other hand, need to be marketed to generate public demand. iRobot aggressively utilizes
social media tools such as Facebook and Twitter primarily for promoting support services and
brand recognition. For example, Facebook had at least 10 fan pages for either iRobot Corporation or selected iRobot home cleaning products like Roomba.
Another branding strategy used by iRobot education concerns how the company
recognized that fewer and fewer American children go into STEM (science, technology,
engineering, math) areas. Because of this, it launched the SPARK (Starter Programs for the
Advancement of Robotics Knowledge) program to stimulate an interest in science and technology. The program caters to students ranging from elementary school to the university level.
iRobot also initiated an annual National Robotics Week program to educate the public on how
robotics technology impacts society. The first national robotics week was held in April 2010
in the Museum of Science in Boston.
iRobot developed an education and research robot, the Create(R) programmable mobile robot, to provide educators, students, and developers with an affordable, preassembled platform for
hands-on programming and development. Students can learn the fundamentals of robotics, computer science, and engineering; program behaviors, sounds, and movements; and attach accessories
like sensors, cameras, and grippers. It also runs a unique and multifaceted Educational Outreach
Program that includes classroom visits and tours of its company headquarters. This is all designed
to inspire students to choose careers in the robotics industry and become future roboticists.
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Exhibit 3
Consolidated Balance Sheet: iRobot Corporation (Dollar amount in thousands)
Year Ending
January 2, 2010
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance of $90 and $65 at January 2,
2010, and December 27, 2008, respectively
Unbilled revenue
Deferred tax assets
Other current assets
Total current assets
Property and equipment, net
Deferred tax assets
Other assets
Total assets
December 27, 2008



Liabilities, redeemable convertible
preferred stock, and stockholders’equity
Current liabilities
Accounts payable
Accrued expenses
Accrued compensation
Deferred revenue and customer advances
Total current liabilities
Long-term liabilities
Commitments and contingencies:
Redeemable convertible preferred stock, 5,000,000 shares authorized
zero outstanding
Common stock, $0.01 par value, 100,000,000 and 100,000,000
shares authorized and 25,091,619 and 24,810,736 shares issued
and outstanding at January 2, 2010, and December 27, 2008,
Additional paid-in capital
Deferred compensation
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities, redeemable convertible preferred stock,
and stockholders’ equity
Despite multiple methods of reaching out to current and potential consumers, some
industry analysts claim iRobot lacks aggressiveness toward customer acquisition. Many
observers believe that iRobot will benefit from more competition to help build industry visibility among consumers.
iRobot is not a manufacturing company, nor has it ever claimed to be. Its core competency
is to design, develop, and market robots, not manufacture them. All non-core activities are
outsourced to third parties skilled in manufacturing. While third-party manufacturers provide
the raw materials and labor, iRobot concentrates on developing and optimizing prototypes.
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Up until April 2010, iRobot used only two third-party manufacturers for its consumer
products: Jetta Co. Ltd. and Kin Yat Industrial Co. Ltd., both located in China. iRobot did
not have a long-term contract with either company, and the manufacturing was done on a
purchase-order basis. This changed in April 2010, when iRobot entered a multi-year manufacturing agreement with electronic parts maker Jabil Circuit Inc., which henceforth would make,
test, and supply iRobot’s consumer products, including the Roomba.6
The Robotic Industry
Robots serve a wide variety of industries, such as the consumer, automotive, military,
construction, agricultural, space, renewable energy, medical, law enforcement, utilities, manufacturing, entertainment, mining, transportation, space, and warehouse industries.
In 2008, before the economic downturn, the global market for industry robot systems
was estimated to be about 110,000 units.7 Industrial robot sales worldwide in 2009 slumped
by about 50% compared to 2008. The sales started to improve from the third quarter of 2009
onward, with the slow recovery coming from emerging markets in Asia and especially from
China. In North America and Europe, sales were also seen slowly improving from late 2009.8
The sales of professional services robots, including military and defense robots, were
about US$11 billion at the end of 2008 and were expected to grow by US$10 billion for the
period of 2009 to 2012.9
Twelve million units of household and entertainment robots were expected to be sold
from 2009 to 2012 in the mass market, with an estimated value of US$3 billion.10
New Markets
The 2009 economic recession had negative impacts on consumer spending. iRobot domestic
sales of robot vacuum cleaners, predominantly the Roomba, were down comparable to other
US$400 discretionary purchases, and its international sales also experienced a slowdown.11
In addition to lower consumer demand, the national and international credit crunches led to a
scarcity of credit, tighter lending standards, and higher interest rates on consumer and business loans. Continued disruptions in credit markets may limit consumer credit availability and
impact home robot sales.
If the robot market does not experience significant growth, the entire industry may not
survive. “Fallout has forced the robotics industry to look outside of its comfort zone and move
into emerging energy technologies like batteries, wind, and solar power,” said Roger Christian, Vice President of Marketing and International Groups at Motoman Inc. He also predicted
growing demand for robotics in health care and the food and beverage industry.12 Under the
Obama administration, there were economic incentives devoted to R&D in alternative energy
industries. For example, “the Stimulus Act passed by Congress in early 2009, a US$787 billion
package of tax cuts, state aid, and government contracts, has made some impact on the alternative energy market in favor of robotics.”13
In addition to its home care and military markets, iRobot hoped to expand into the civil
law enforcement market and the maritime market. It also explored possibilities in the health
care market.14 It partnered with the toy company Hasbro to enter the toy market with My Real
Baby—an evolutionary doll that has animatronics and emotional response software.
iRobot continued to grow its international presence by entering new markets. The percentage of its international sales rose from 38% in 2008 to 53.8% in 2009.15 Its growing focus
on international sales resulted in an increase of US$23.2 million in international home robots
revenue for 2009 compared to 2008. iRobot also sold its military products overseas in compliance with the International Traffic in Arms Regulations.
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Challenges Ahead
Consumer Marketplace
iRobot was competing in a new and emerging market. Although the industry had relatively
low competition, analysts believed iRobot needed “more competition, not less, to help build
up the total scale and visibility of the fledgling industry it had been pioneering.”16 If the
demand for the home robots became stagnant or declined, this would greatly impact the vitality of iRobot and put it under pressure to remain innovative and adaptive to consumer needs in
the event that it did gain widespread popularity.
iRobot’s consumer products were primarily a luxury supplemental good gauged toward
the middle and upper class. iRobot’s home cleaning robots were reasonably priced from
US$129 to US$1000, depending on the model and accessories. Such a price range was comparable with luxury brands of vacuum machines. However, times of economic recession could
prove to be a problem for iRobot’s consumer goods sales given that discretionary budgets have
contracted. To save money, iRobot’s base customers may revert to manual labor.
Supply Chain
For many years, iRobot had only two China-based manufacturers to produce its home cleaning robots and no long-term contract with either of those companies. Its best-selling Roomba
400 series and Scooba series, for example, were both produced by Jetta at a single plant in
China. This put iRobot in a high-risk situation if Jetta was unable to deliver products for any
unforeseen reason, or if quality started to dip below standards.
Fortunately, iRobot was aware of the problem and signed a new manufacturing agreement with U.S.-based Jabil Circuit. This relationship provided iRobot with numerous benefits,
including diversifying key elements of its supply chain, providing geographic flexibility to
address new markets, and expanding overall capacity to meet growing demands, explained
Jeffrey Beck, president of iRobot’s Home Robots Division. Whether this attempt to diversify
its supply chain with a new partnership will work out is of crucial importance for iRobot.
Intellectual Property
Continued development of products that are difficult to duplicate through reverse engineering
will be the key to success in the area of intellectual property. By maintaining strong relationships and giving superior service to customers such as government agencies, iRobot can
create an advantage even if they are unable to ultimately protect their technology from being
duplicated. At the same time, iRobot also needs to ensure that its employees will continue to
be innovative and create new technologies to keep iRobot competitive for years to come.
Government Contracts
Nearly 40% of iRobot’s revenues are from government-contracted military robots. As a contractor or a subcontractor to the U.S. government, iRobot is subject to federal regulations.
Fiscal policy and expenditure can be volatile, not only through a single presidency, but
certainly during the transition from one presidency to the next. The volatility and unknown
demand of the U.S. government presents a problem. The economic fallout from the recession also impacted U.S. federal budgetary considerations. Emphasis and focus was placed on
larger, more troubled industries, with large bailout packages made available to financial and
automotive companies. It remains to be seen how these large outlays will affect the federal
government’s ability to continue to fund contracts for robotics.
Strategic Alliances
iRobot relied on strategic alliances to provide technology, complementary product offerings,
and better and quicker access to markets. It entered an agreement with The Boeing Company
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to develop and market a commercial version of the SUGV that was being developed under the
Army’s BCTM (formerly FCS) program. It also formed an alliance with Advanced Scientific
Concepts Inc. for exclusive rights to use the latter’s LADAR technology of unmanned ground
vehicles. In exchange, iRobot commited itself to purchase units from Advanced Scientific
iRobot’s Challenge
iRobot’s focus on home cleaning products differentiates it from all the other manufacturers in
the robotics industry, which are mainly focused on manufacturing robots for the automotive
sector. iRobot’s focus on two entirely different markets—consumer and military—allows it
(1) the ability to leverage its core capabilities and diversification, and (2) provides it with a
hedge against slower demand in one sector. By introducing robotics to the consumer market,
iRobot has created a “blue ocean of new opportunities.” However, iRobot had numerous competitors with more experience in the consumer marketplace.
An analyst wondered if the long-term success in the consumer market would require
iRobot to develop more “blue oceans.” Also, did it make sense for iRobot to continue to
develop new consumer products or would it be better off focusing on the military and aerospace marketplace?
12. B. Brumson, 2010, “Robotics Market Cautiously Optimis-
iRobot 2009 Annual Report, Form 10K, filed February 19, 2010.
iRobot 2009 Annual Report, 2010.
“iRobot Enters Manufacturing Deal with Jabil,” The Lowell
Sun, (April 28, 2010).
Gudrun Litzenberger, IFR Statistical Department, “The Robotics
Industry Is Looking Ahead with Confidence to 2010,” http://www