Celtic Football Club Valuation

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A STRATEGIC AND FINANCIAL VALUATION
OF CELTIC FOOTBALL CLUB
Author: Jørgen Breistein
Copenhagen Business School, 2016
Master Thesis, MSc. (cand.merc) in Accounting Strategy and Control
Supervisor: Peter Malmkjær
Submitted: 27.01.2016
Pages: 73 Characters: 180956

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Acknowledgements
First of all I would like to thank my academic supervisor Peter Malmkjær. Thank you for your valuable
feedbacks and for guiding me through the process of writing this thesis. I wish you the best in the
upcoming future. Secondly, I would like to thank my family and friends that always made me believe
in myself and who’s support I really appreciate. Finally, I would like to express my sincere gratitude to
Hilde for your comments, advice and encouragement.

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Abstract
During the last decade, the football industry has witnessed a rapid growth. Increasing revenues,
together with implementation of tighter cost control regulations, is expected to increase the interest
among profit seeking investors to invest in the industry. However, the shares of most football clubs
has been illiquid and stagnant in recent years which gives reason to question whether the current
market prices reflect the true financial value of the shares. Based on the above, there is an increased
need to know the fair value of a professional football club.
By using Celtic Football Club as a case, the aim of this thesis is to estimate the true value of the club
and the corresponding value per share as of 01.08.2015. In order to give a defendable value estimate
of the club, fundamental valuation is chosen as the preferred valuation technique. This means that
the valuation is based on the analyses of underlying economic conditions, estimation of the expected
future value stream and discounting these value streams by an appropriate discount factor. Insight
into Celtics underlying economic conditions were gained through a thorough strategic analysis, based
on well known frameworks such as PEST, Porters Five Forces and VRIO. Further, a financial analysis
using Celtics financial numbers from the period 2007-2014 was included. Information extracted from
these analyses has helped increasing the reliability in the forecasted value streams used to estimate a
fair value of the club.
Based on the analyses in the thesis, a share price of £0,44 was estimated at the valuation date, which
indicates a 39% downside to the market price of £0,735. Further, a thorough sensitivity analysis
indicates a relatively high degree of uncertainty in the value estimate, which leads to a concluding
discussion about the current accounting practise among professional football clubs and to what
extent they provide the information needed in order to make a defendable value estimate of the
clubs. This thesis suggest that more transparency in football clubs financial statements is needed in
order to make a more precise value estimate of professional football clubs.

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TABLE OF CONTENT
CHAPTER 1: INTRODUCTION...................................................................................8
1.1 RESEARCH QUESTION.....................................................................................................................................8
CHAPTER 2: METHODOLOGY..................................................................................9
2.1 DATA COLLECTION……………………………………………………………………………………………………………………………………9
2.2 LIMITATIONS AND ASSUMPTIONS...............................................................................................................10
2.3 APPLIED VALUATION METHOD.....................................................................................................................10
2.3.1 RELATIVE VALUATION METHOD ...........................................................................................................11
2.3.2 DISCOUNTED CASH FLOW VALUATION METHOD.................................................................................11
2.4 THE STRUCTURE OF THE THESIS…………………..………………………………………………………………………………….………12
CHAPTER 3: COMPANY PRESENTATION AND INDUSTRY OVERVIEW ...............13
3.1 CELTIC FC ......................................................................................................................................................13
3.1.1 THE MACCANN TAKEOVER AND LISTING ON LONDON STOCK EXCHANGE ..........................................13
3.2 INDUSTRY OVERVIEW...................................................................................................................................14
3.2.1 REVENUES AND EXPENSES IN PROFESSIONAL FOOTBALL ....................................................................14
3.2.2 THE SCOTTISH FOOTBALL INDUSTRY ...................................................................................................15
3.2.3 CELTIC IN THE SCOTTISH FOOTBALL INDUSTRY ...................................................................................16
3.2.4 CELTIC IN THE EUROPEAN FOOTBALL INDUSTRY .................................................................................17
CHAPTER 4: STRATEGIC ANALYSIS ................................................................…17
4.1 PEST ANALYSIS..............................................................................................................................................18
4.1.1 POLITICAL AND LEGAL REGULATIONS..................................................................................................18
4.1.1.1 THE FINANCIAL FAIR PLAY...................................................................................................18
4.1.2 ECONOMIC FACTORS…………………………..………………………………………………………………….….……….……20
4.1.2.1 REAL GDP GROWTH AND UNEMPLOYMENT RATE.............................................................20
4.1.2.2 UEFA PRIZE MONEY DISTRIBUTION....................................................................................21
4.1.2.3 INTEREST RATE AND CURRENCY RISK................................................................................22
4.1.3 SOCIO AND CULTURAL FACTORS……………... ………………………………………………………………….……………….22
4.1.3.1 DEMOGRAPHICS................................................................................................................22
4.1.3.2 GLOBALIZATION ................................................................................................................22
4.1.2 TECHNOLOGICAL FACTORS………………..………………………………………………………………….……………..…23
4.1.4.1 BROADCASTING................................................................................................................23
4.1.4.2 MULTIMEDIA....................................................................................................................24
4.1 PORTERS FIVE FORCES ..................................................................................................................................24
4.2.1 THREATS OF NEW ENTRANTS .............................................................................................................24
4.2.1.1 THREAT OF NEW ENTRANTS IN THE SCOTTISH FOOTBALL INDUSTRY ..............................25
4.2.1.2 THREAT OF NEW ENTRANTS IN THE EUROPEAN FOOTBALL INDUSTRY............................25
4.2.2 BUYERS BARGAINING POWER ………………..………………………………..…………………………….……………….25

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4.2.2.1 SUPPORTERS.....................................................................................................................25
4.2.2.2 MEDIA...............................................................................................................................26
4.2.2.3 SPONSORS ........................................................................................................................26
4.2.3 THREATS OF SUBSTITUTES ………………..………………………………..…………………………….…………………….27
4.2.3.1 SWITCHING COSTS............................................................................................................27
4.2.3.2 PRODUCT DIFFERENTIATION............................................................................................27
4.2.3.3 PRICE/PERFORMANCE RATIO...........................................................................................27
4.2.4 SUPPLIERS BARGAINING POWER ………………..………………………………..…………….………….……………….27
4.2.4.1 PLAYER SALARIES..............................................................................................................28
4.2.5 COMPETITIVE RIVALRY..................................................................................................................28
4.2.6 SUMMARY OF PORTERS FIVE FORCES ...........................................................................................29
4.3 VRIO..............................................................................................................................................................29
4.3.1 CELTIC PARC ..................................................................................................................................30
4.3.2 STRATEGIC MANAGEMENT...........................................................................................................31
4.3.3 FIRST TEAM SQUAD.......................................................................................................................31
4.3.4 YOUTH ADADEMY .........................................................................................................................32
4.3.5 THE CELTIC FANS ...........................................................................................................................32
4.3.6 THE CALTIC BRAND NAME.............................................................................................................33
4.3.7 CONCLUSION VRIO ANALYSIS........................................................................................................33
4.4 SUMMARY OF THE STRATEGIC ANALYSES ....................................................................................................34
CHAPTER 5: FINANCIAL STATEMENT ANALYSIS...........................................35
5.1 ACCOUNTING QUALITY AND PRACTICE ........................................................................................................35
5.1.1 ACCOUNTING QUALITY .................................................................................................................35
5.1.2 ACCOUNTING PRACTICE................................................................................................................35
5.1.2.1 FOOTBALL PLAYER CONTRACTS (INTANGIBLE ASSETS) .............................................................36
5.1.2.2 TRANSFER ACTIVITIES AND WAGES...........................................................................................37
5.2 CELTICS ANALYTICAL INCOME STATEMENT AND BALANCE SHEET ...............................................................37
5.2.1 ANALYTICAL BALANCE SHEET (INVESTED CAPITAL)………………………….………...……………….…………………..37
5.2.2 ANALYTICAL INCOME STATEMENT (NOPAT)…………..………………………….………...……………….………………..39
5.2.2.1 REVENUES FROM CORE OPERATIONS .......................................................................................39
5.2.2.2 CORE OPERATING EXPENSES ....................................................................................................40
5.2.2.3 OPERATING SPECIAL ITEM.........................................................................................................40
5.2.2.4 AMORTIZATION, IMPAIRMENTS AND DEPRECIATIONS.............................................................41
5.3 PEER GROUP.................................................................................................................................................41
5.4 PROFITABILITY ANALYSIS .............................................................................................................................42
5.4.1 PROFIT MARGIN………………………………………………………………………………….………...……………….………………43
5.4.1.1 OPERATING MARGINS ...............................................................................................................44
5.4.1.1.1 OPERATING PROFIT BEFORE SPECIAL ITEMS ..............................................................44
5.4.1.1.2 EBITDA.........................................................................................................................48
5.4.1.1.3 EBIT .............................................................................................................................49
5.4.2 TURNOVER RATE OF INVESTED CAPITAL…….…………………………………………….………...……………….…………49
5.4.3 CONCLUSION ON THE PROFITABILITY ANALYSISL..………..………………………….………...……………….…………50
5.5 PLAYER TRANSFER ACTIVITIES ......................................................................................................................51

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5.6 LIQUIDITY ANALYSIS......................................................................................................................................51
5.6.1 SHORT TERM LIQUIDITY RISK…………………………………………………………….………...……………….…………………52
5.5.2 LONG TERM LIQUIDITY RISK…………..………………………………………………….………...…………..………….…………52
5.7 CONCLUSION OF FINANCIAL AND STRATEGIC ANALYSIS (SWOT)................................................................53
CHAPTER 6: WEIGHTED AVERAGE COST OF CAPITAL................................53
6.1 ESTIMATING FUTURE CAPITAL STRUCTURE..............................................................................................54
6.2 ESTIMATING COST OF EQUITY (CAPM).........................................................................................................55
6.2.1 ESTIMATING RISK FREE RATE…………………………………………………………….………...……………….…………………55
6.2.2 ESTIMATING MARKET RISK PREMIUM……………………………………………….………...……………….…………..……55
6.2.3 ESTIMATING BETA…………………………………………………………….………...……………….…………………..……….……56
6.2.4 LIQUIDITY PREMIUM…………………………………………………………….………...……………………….…….………………58
6.2.5 REQUIERED RATE OF RETURN ON EQUITY………………………..……………….………...…….………….………….……58
6.3 COST OF DEBT...............................................................................................................................................59
6.4 CALCULATING WACC ....................................................................................................................................59
CHAPTER 7: FORECAST ...........................................................................................60
7.1 BUDGET PERIOD ...........................................................................................................................................60
7.2 FORECAST SCENARIOS..................................................................................................................................60
7.3 “MOST LIKELY” SCENARIO ............................................................................................................................61
7.4 REVENUE FORECAST.....................................................................................................................................61
7.4.1 STADIUM AND FOOTBALLING REVENUE FORECAST ……………………………………………….…….…………………61
7.4.1.1 VOLUME (ATTENDANCE)...........................................................................................................…61
7.4.1.2 NUMBER OF GAMES PER SEASON................................................................................................62
7.4.1.3 PRICE (AVERAGE INCOME PER VISITOR PER GAME) ....................................................................62
7.4.1.4 FORECASTED REVENUES FROM STADIUM AND FOOTBALLING AVTIVITIES .................................63
7.4.2 MERCHANDISING REVENUE FORECAST
…………………………………….…………………………..……….…….…………63
7.4.3 REVENUE FROM MULTIMEDIA AND COMMERCIAL ACTIVITIES FORECAST ………………………...………..…64
7.4.4 UEFA REVENUE FORECAST……………………………………………………………………… ………………………...………..…65
7.4.5 SUMMARY OF OPERATING REVENUE FORECAST…………………………………….. ………………………...……….…66
7.5 OPERATING EXPENSES FORECAST.................................................................................................................67
7.5.1 FORECASTED STAFF EXPENSE ……………………………………………………………………………….…….…………………67
7.5.2 OTHER OPERATING EXPENSE FORECAST ……………………………………………………………….…….…………………69
7.5.3 SUMMARY OF OPERATING EXPENSE FORECAST ……………………………………………………..…….……….………69
7.6 RECURRING SPECIAL ITEM ............................................................................................................................70
7.6.1 COMPROMISE PAYMENTS ON CONTRACT TERMINATIONS …………………………………….…….………….……70
7.6.1 PROFIT FROM PLAYER TRANSFERS ………………………………………………………………….…….………………………70
7.7 NON-CURRENT ASSETS .................................................................................................................................71
7.7.1 INVESTMENTS IN NON CURRENT ASSETS ……………………………………………………………….…….…………..……71
7.7.2 DEPRECIATION AND AMORTIZATION …………………………………………………………………….…….…………..……72
7.8 NET WORKING CAPITAL ................................................................................................................................26

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7.9 NET TAXES.....................................................................................................................................................73
CHAPTER 8: VALUATION.........................................................................................73
8.1. SENSITIVITY AND SCENARIO ANALYSIS........................................................................................................74
8.1.2 UEFA RESULTS AND TRANSFER ACTIVITIES (SCENARIO ANALYSIS).......................................................75
8.1.3 CHANGING WACC AND GROWTH RATE................................................................................................76
8.1.4 MONTE CARLO SIMULATION ................................................................................................................76
8.1.5 SUMMARY OF MONTE CARLO ..............................................................................................................78
CHAPTER 9: CONCLUSION......................................................................................79
9.1 REFLECTIONS.................................................................................................................................................80
REFERENCES ...............................................................................................................81
APPENDIX .....................................................................................................................91

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Chapter 1 - Introduction
“The Board continues to apply corporate governance principles in a sensible and pragmatic fashion having
regard to the individual circumstances of the Company´s business, with the overarching objective to create,
safeguard and enhance accountability, risk management, commercial success and shareholder value”
(Celtic Football Club, 2014a, p19).
As the quote above indicates, the time when football was just a game where two teams of 11 players tried to get
the ball into the opponent´s goal is history. Rapid growth in revenue streams from advertising, gate receipts,
media broadcasting and sponsor agreements have transformed football from a sport played and watched purely
for social enjoyment, into a multi-billion entertainment industry (Markham, 2013; Blair, n.d.). The growth in
revenues has made it possible for British football clubs to generate substantial returns to their owners (Conn,
2002). Consequently, a large number of football clubs chose to list shares on stock exchanges during the 1990`s
(Markham, 2013). As it turns out however, the investors have benefited little form this development. Instead,
the increased revenues led to a short-term spending spree where clubs spent waste amounts of capital on player
transfers and high player salaries. This has led to a situation in which professional football clubs have been
associated with bad financial control, and with good reason. In 2010 as many as one third of all the clubs
participating in UEFA tournaments had negative equity (UEFA, 2011, p114). Overspending and lack of financial
control seems to have scared investors from investing in professional football clubs, leading to illiquid shares and
share prices that does not necessarily reflect the true value of the football clubs (Markham, 2013).
However, the recent implementation of cost regulations combined with the continuous revenue growth in the
industry, is believed to once again strengthen investors interest in football clubs (Deloitte, 2015a). One example
of such cost control regulations is UEFA´s Financial Fair Play (FFP), which forces UEFA participating clubs to break-
even over a two-year period in order to enter tournaments (UEFA, 2015a). According to The Telegraph´s (2015)
investment predictions for the sport industries, there has never been a better time to invest in a professional
football club. If this is true, there is an increased need to know the true fair value of a football club. Using Celtic
Football Club (Celtic FC) as a case, it is within this context that this thesis attempts to contribute to the literature.
Celtic is a Scottish football club founded in 1888 (Celtic Football Club, n.d.). During the past couple of years Celtics
share has been fairly stable, and not even surprising events such as Celtics loss to Slovenian underdog Maribor
FC in the 2014 Champions League playoffs moved the share price by a penny. This happened despite the fact
that the loss cost Celtic between £10-20m in revenues (UEFA, 2015). Thus, it is reasonable to believe that Celtics
current share price may be over- or underestimated, making it relevant to conduct a fair value estimation of the
football club. The value estimate will in this thesis be approached from a financial perspective, where “fair value”
is defined as the value where investors are indifferent to being either a buyer or a seller at that value
(Damodaran, 2010).
1.1 Research question
Based on the expectations of an increased investor interest in professional football clubs, the main aim of this
thesis is to provide a fair value estimate of Celtic FC´s share. As such, this thesis takes the perspective of an
external investor. This has led to the following main research question:
“What is the value of one Celtic FC share per 01.08.2015 compared to the market price?”

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To help answer the main research question and guide this thesis, several sub-questions have been
formulated. These are:
 What strategic position does Celtic hold in the Scottish and the European football market?
 What macro, industry and firm specific factor is of relevance for future earnings potential and risks?
 What are the main revenue and cost drivers for a professional football club and how is Celtics costs
and revenues expected to develop in the future?
 How big impact does footballing success have on Celtics profitability?
 How precise is the value estimate?
Chapter 2 – Methodology
This section will explain, in a clear and systematic way, how the main problem statement will be answered, what
models that will be used and what academic theory the thesis is based on. The theoretical frameworks applied
in this thesis will only be presented briefly, as they will be explained more in-depth later on in the thesis.
2.1 Data Collection
The choice of research method should be a reflection of the research question at hand (Silverman, 2003). This
thesis is based on a fundamental approach, where both the financial and non-financial factors that may affect
the value of one Celtic FC share are analysed. Consequently, a combination of both quantitative and qualitative
data has been applied. Because this thesis is written from the perspective of an external investor, only publically
available data has been used. In this regard, Celtics annual reports have been an especially important source of
information, as they provided both historical numbers as well as information on the strategic outlooks of the
club. Financial reports from the last seven years (2007-2014) have been used as input in the financial analysis of
this thesis. The timeframe of seven years has been chosen as it is seen as sufficient in order to give a solid
overview over historical developments in cost and revenues as a basis for the valuation. Other important sources
of data have been industry reports from Deloitte, PWC, BDO and UEFA, scientific work and newspaper articles.
Raw data has also been obtained from large databases such as ORBIS and IMF. Academic literature has played a
significant role in terms of substantiating the arguments presented in this thesis. The valuation approach and
financial statement analysis method used in this thesis is for example highly influenced by the work of Petersen
and Plenborg (2012). However, input from other theoretical literature has been necessary in order to cope with
the many problems one encounters when valuing a professional football club. Highly volatile earnings, several
sources of revenues and the accounting treatment of intangible assets are just some of the issues where the
input form other academic literature has been seen as necessary. Thus, Damodaran’s “The dark side of valuation”
(2001) and “Investment valuation: tools and techniques for determining the value of any asset” (2012), together
with Rosenbaum and Pearl`s “Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisition”
(2009) has contributed to a more profound understanding of how to conduct the valuation of Celtic.

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2.2 Limitations and assumptions
To enhance the legitimacy of this thesis, it is important to disclose and reflect upon possible limitations and
assumptions. One important shortcoming relates to the applied financial data. Celtic releases their annual
reports on September 11 every year, and while it is acknowledged that including Celtic´s Annual Report for 2015
could have provided this thesis with valuable and more up-to-date information, the report has been excluded
due to time-constraints. It was simply not possible for the author to wait until the release date of the Annual
Report to work on the financial analysis of this thesis. Thus, the time of valuation has been set to the 1st
of August
2015. Another shortcoming of this thesis is that numbers for inflation rates, GDP growth and unemployment
rates are based on UK estimates. This has been done because the International Monetary Fund (IMF) does not
provide numbers for Scotland alone. IMF numbers have still been applied as IMF is seen as the most reliable
source when it comes to estimating future economic developments. Finally, the lack of transparency on certain
elements in Celtic´s annual reports, has forced the author to seek this information elsewhere. The items where
external data has been obtained are a) prize money from UEFA tournaments, b) match day attendance, and c)
detailed information on player transfers and individual player contracts. This must be considered as a weakness,
due to the uncertainty connected to externally retrieved numbers.
Some assumptions have also been made in order to meet the formal time and space requirements. Thus, this
thesis is based on the assumptions presented in table 2.1.
Assumptions
1) The thesis is written in such a manner that it assumes that the reader has a basic knowledge and
understanding of the applied methods and models. Hench some details in descriptions of models and
theory may be missing from this thesis.
2) Future marginal tax rate is set to 20%, which is the marginal tax rate in UK per 01.08.2015.
3) Future Euro/GDP exchange rate is set to 1,343, which is Danske Banks (2015) long term forecast about
the exchange relationship at the date of valuation (01.08.2015). This rate will be used when calculating
Celtics future UEFA prize money from Euro to GBP.
Table 2.1 - Assumptions. Source: Own creation
2.3 Applied valuation method
This section is included in order to provide some reflections around the choice of valuation method. Thornton
and Matyszczyk (2010, p1) have argued that: “Fundamentally, the techniques for valuing a football club are the
same as those employed in valuing any enterprise”. Thus, it may be useful to look at the four most common
valuation methods used to established a company`s true value (Petersen & Plenborg, 2012):
 Liquidation
 Option pricing
 Relative valuation
 Discounted cash flow (DCF)

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The first two valuation approaches (liquidation and option pricing), are less frequently used by practitioners
when estimating the long-term value of a company, as these models most often value companies facing
bankruptcy and financial distress (Petersen & Plenborg, 2012). Consequently, no further explanation of these
two models is provided. Rather, the focus in this section will be placed on the relative valuation and the
discounted cash flow methods.
2.3.1 Relative valuation method
In relative valuation, the value of a firm is derived from the pricing of comparable assets or firms, standardized
using a common variable such as earnings, cash flows, revenues etc. (Damodaran, 2012). The idea behind this
approach is that multiples can be derived from an industry average to value the firm, the assumption being that
the other firms in the industry are comparable to the firm being valued and that the market, on average, prices
these firms correctly. It is a simple technique typically used to value younger or troubled businesses, which
cannot be valued by methods that require a positive cash flow. The method is also suited to industries with
volatile earnings (Damodaran, 2012). Despite the positive sides of applying the relative valuation method, there
are factors which makes it difficult to apply the method in this thesis. Due to Celtics unique characteristics in
terms of size, fan base and turnover, there are no comparable clubs in the Scottish football industry. Valuing
Celtic to international clubs of similar size and income characteristics could of course be done, but there would
always be a risk that clubs from different leagues are facing different risks, which would make them incomparable
(Petersen & Plenborg, 2012). Due to this, it is difficult if not impossible to value Celtic with certainty in the value
estimate by the use of the relative valuation approach. In addition, it was pointed out in the introduction of this
thesis that football shares tend to be illiquid, which gives reason to question whether or not other football clubs
are fairly priced by the market (Markham, 2013). Based on the above mentioned, no relative valuation has been
included in this thesis.
2.3.2 Discounted Cash Flow valuation method
The discounted cash flow-model (DCF) is a fundamental method, premised on the principle that the value of a
company can be derived from the present value of its projected future cash flows (Rosenbaum & Pearl, 2009,
p109). These projected cash flows should be discounted at the weighted cost of capital (WACC), which should
reflect the risk related to future cash flows as well as the time value of money, to give the intrinsic value of the
company (Petersen & Plenborg, 2012, p212). When forecasting future cash flows in the DCF-model, the future is
usually divided into two periods. Firstly, a budget period covers all future years where it is realistic to make
detailed assumptions about each year’s revenues and costs. After this, the terminal value captures the value of
all cash flows beyond the budget period. The expression below shows the mathematical formula for a DCF
valuation.
𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑐𝑒 𝑉𝑎𝑙𝑢𝑒0 = ∑
𝐹𝐶𝐹𝐹𝑡
(1 + 𝑊𝐴𝐶𝐶) 𝑡
+
𝐹𝐶𝐹𝐹𝑛−𝑡
𝑊𝐴𝐶𝐶 − 𝑔
𝑛
𝑡−1
∗
1
(1 + 𝑊𝐴𝐶𝐶) 𝑛
The DCF approach to valuation is seen as the best possible way of answering the main research question and
Budget
Period
Terminal
Period

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this thesis intend to apply the DCF approach that uses forecasted Free Cash Flows to the Firm (FCFF). The FCFF is
the cash generated by a company after paying all cash operating expenses and taxes, as well as the funding of
capital investments and working capital but prior to the payment of any interest expenses (Rosenbaum & Pearl,
2009, p111). Unlike relative valuation, which can only value companies with a peer group of comparable
companies and companies where financial data are available, DCF can value any company that has
predominantly positive cash flows going forward (Damodaran, 2012). One of the critiques against the DCF-model
in cases of football clubs is that many football clubs historically has been loss making entities and therefore do
not have positive cash flows to value (Markham, 2013). However, new restrictions are being implemented in the
football industry in order to avoid negative earnings in the future and the effects of these restrictions is already
reflected in football clubs financial statements in terms of more positive results (UEFA, 2015b, p9). The DCF-
model is also commonly used by experts within the business of sports such as Grant Thornton and Deloitte
(Thornton & Matyszczyk, 2010; Markham, 2013). This thesis intend to follow their recommendation and apply
the DCF method to valuation in order to estimate the true value of Celtic FC.
2.4 The structure of the thesis
This thesis will be structured as follows. In chapter 3, a short presentation of Celtic FC and the markets it operates
within will be presented. In addition, the most important cost/revenue drivers for these industries will be
explored. Chapter 4 entails several strategic analyses of the external and internal factors that influences Celtics
future earnings and cash flow potentials. The PEST-framework will be applied to analyse the external factors,
while Porter´s Five Forces model will be applied in the analysis of the Scottish and European football industries.
Finally, firm specific factors for Celtic FC is analysed through the VRIO-framework. Chapter 5 provides an analysis
of Celtics historical financial performance based on reformulated financial statements. The purpose of this
chapter is to provide an understanding of Celtics historical and current financial situation. This is essential in
order to make defendable forecasts about the
future. In chapter 6, the discount rate used to
discount the forecasted cash flows is calculated.
Based on the information provided in chapter 4
and 5, chapter 7 will provide forecasts of Celtics
future cash flows. These estimated cash flows
will serve as input to the final value estimate of
Celtic´s fair value in chapter 8. Chapter 8 applies
the calculated discount factor from chapter 6
and the forecasted cash flows from chapter 7, in
order to estimate the fair share price of one
Celtic share at the date of valuation. The validity
of the value estimate will be further tested
trough a sensitivity analysis and a Monte Carlo
simulation. Finally, chapter 9 provides a short
conclusion and some reflection around the
findings presented in this thesis.Figure 1.1 - Structure of the thesis. Source: Own creation

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Chapter 3 Company presentation and industry overview
This section will give a short introduction to Celtic FC and the football industry more general. Celtics strategic
position within the Scottish as well as the European football industry will be looked at in order to give the reader
a better understanding of Celtics competitiveness compared to other Scottish and European football clubs.
3.1 Celtic FC
Celtic FC is a Scottish football club established in Glasgow in 1887 as an initiative for the poor Irish immigrant
population. Celtics first match was a 5-2 victory in a friendly match against Rangers FC, which later should turn
out to be their biggest rivals for the next 125 years (Celtic Football Club, 2014b). Celtic FC was an immediate
success, and the team quickly established themselves in the top of Scottish football. As of today, Celtic has won
the Scottish league on 46 occasions, most recently in the 2014-15-season. The club has also won 51 domestic
cup trophies’ and 1 European cup title (in 1966/67). The two Glasgow clubs Celtic and Rangers have dominated
Scottish football and have shared the league trophy between them the last 30 years. After the 2012 season,
Rangers were relegated down to 2nd
division, after having showed negative financial results over quite some
time. In October 2012, the club was declared bankrupt. Celtic has won the league every year since. However,
Rangers has made their way back to the first division in Scottish football and experts expects them to be
promoted to the Premiership after the current season (BBC, 2015a). The expected return of Rangers to the top
division is believed to have a huge impact on the future of Scottish football, as will be seen throughout this thesis.
Celtic has over the years been able to build a famous brand name around the world due to their long period of
dominance in both European and Scottish football. Due to Celtics Irish origin, the club has a special place in many
Irish communities across the world. There are for example over 60 supporter clubs in North America alone (North
American Federation of Celtic Supporters Clubs, n.d.). As such, Celtic currently ranks 34th
place on Brand Finances
(2015) annual ranking of the most valuable football brands.
3.1.1 The McCann takeover and listing on London stock exchange
Throughout the 1960s and 1970s, Celtic was in the top of European football both in terms of revenues and
footballing success. However, Celtics directors failed to accompany the wave of economic development facing
the football industry in the 1980s. The result was that Celtics footballing performance deteriorated at the same
time as debt increased throughout the late 1980s and early 1990s (Morrow, 2000). The situation became so bad
that on March 4th 1994, businessman Fergus McCann bought Celtic FC for £9m to rescue the club from going
into administration (Daily Record, 2014). McCann turned Celtic into a publicly traded company through a share
issue of £14m, the most successful share issue in British football history (Lomax, 2000). McCann also invested
£40m in the building of the new Celtic Park, which still is the stadium where Celtic plays their home matches.
The new 60000 seat stadium helped Celtic back to a healthy financial position by providing annual revenues from
ticket sales of approximately £20m (The Scotsman, 2004). In September 1999, McCann sold his 50,3% share at
Celtic FC with a profit of £40m. Celtic has been listed on the stock exchange ever since and table 3.1 shows a list
of the current shareholders with a share of more than 3%.

14
Shareholders Shares in %
Line nominee limited (owned by Dermot Desmond) 35,31%
The bank of New York 13,10%
Christopher D Trainer 10,55%
James Mark Keane 6,37%
Pershing international Limited 4,82%
Tom Allison 3,62%
Finsbury Growth & Income Trust 3,6%
Table 3.1 - Shareholders as of 19.february 2015. Source; Celtic Football Club, 2015
3.2 Industry overview
3.2.1 Revenues and expenses in professional football
In order to provide some basic information about how Celtic and other professional football clubs operate, an
overview over sources of revenues and costs are included in table 3.2 and 3.3. As table 3.2 shows, there are
certain differences between how the average European and Scottish clubs generate revenues. The main
difference is the fact that Scottish clubs do not generate as much revenues from sponsors and broadcasting as
the teams in the biggest European leagues do.
Revenue source EU SCO Celtic
2014
Explanation 5 year growth
(EU)
1)Domestic
Broadcasting rights
34% 13%
13%
Selling of broadcasting rights for showing
the football matches.
45%
2) Sponsorship and
commercial
33% 15% Shirt suppliers, shirt sponsors, commercial
agreements etc.
46%
3) Match day revenues 16% 34% 44% Ticket sale, food and beverage, VIP
lounges,
2%
4) Merchandising 9% 13% 21% Selling of supporter effects such as jerseys,
scarf etc.
13%
5) UEFA prize money 8% 22% 22% Prize money earned from participating in
UEFA tournaments
95%
Table 3.2 - Sources of revenue in European football in 2014. Source: UEFA, 2015b; Celtic Football Club, 2014a
While European clubs increasingly are drawing benefits from substantial growth in broadcasting and commercial
activities, match day revenues continue to be the most important source of income among Scottish football
clubs. Table 3.2 indicates that the largest growth in revenues at a European level stems from revenues generated
from participation in UEFA cup tournaments (prize money), which has increased with as much as 95% over the
last five years. On the contrary, revenues from match days has only increased with 2% over the same period. The
large growth in revenues from commercial activities and domestic broadcasting does not show a realistic picture
of the industry as a whole since the 20-30 largest clubs in the world generates most of the growth (see Appendix
1) (Deloitte, 2015b). Table 3.2 shows that Celtic is earning most of their revenues from merchandising, match

15
day and UEFA prize money and only a combined 13% of revenues comes from domestic broadcasting and
sponsorship agreements, indicating that Celtic and Scottish football has not managed to benefit from the
increased broadcasting and sponsorship revenues in the industry.
Cost Source EU SCO Celtic 2014 Explanation
1) Wage
expenses
60% 59% 58,3% Covers Salaries to players and other personnel
2) Other
operating
Expenses
32% 38% 31,5% Covers all costs of running a football team; Traveling, training,
food, renovation of the stadium etc.
3) Net
transfer costs
5% -5-
10%
-16% Net result between buying and selling football personnel
4) Net
financial
expense
3% 3% 1% Costs in relation to promotion of matches, jerseys of other
marketing activities.
Table 3.3 – Expenses in European football in 2014. source: UEFA, 2015b; Celtic Football Club, 2014a
Table 3.3 shows an overview of the biggest cost drivers among professional football clubs. First, it shows that the
wages as percentage of revenues are slightly higher in the European industry, than what it is within the Scottish.
Second, the table shows that other operational costs takes up a higher share of revenues for Scottish clubs. Table
3.3 also shows the differences in terms of Net Transfer Cost. Football is unique compared to other professional
sports. Professional football clubs are allowed to sell player contracts through the “transfer market”, which is
open twice year (June-September and January-February). The increased revenues in professional football over
the last two decades have increased the amounts spent on player transfers substantially. However, the increasing
gap in revenues between clubs from the richest leagues (England, France, Germany, Spain and Italy) and the rest
of European football, has caused a situation where the richest clubs are so called net transfer spenders, meaning
that they can afford to spend more money on player transfers than what they generate from selling players
(UEFA, 2015b). In smaller leagues however, income from transfer activities is a crucial part of the strategic and
financial mix (UEFA, 2015b). This is seen in table 3.3, where Scottish clubs on average earn between 5-10% of
revenues on transfer activities, while the average European club are net transfer spenders (5% of revenues).
Celtic had a positive transfer result in 2014 equalling 16% of operating revenues. The last thing table 3.2 shows
is that the net financial expense is low throughout the football industry.
3.2.2 The Scottish football industry
The top four divisions in Scottish football are all part of the league system called Scottish Professional Football
League (SPFL). Teams can move up or down between the different divisions based on their league position at the
end of each season. This thesis limits the Scottish football industry to the twelve teams playing in the Scottish
Premiership, which is the highest division in Scotland. As in every other league in Europe, the teams finishing on
top get to compete in European cups against the top contenders from other leagues. The best teams from each
domestic league gets qualified to the Champions League, while the second best teams play each other in a
tournament called UEFA Europe League. Each league gets a certain amount of qualification places for these two

16
cup-tournaments based on its leagues ranking on the UEFA league ranking (UEFA, n.d.). The Scottish premiership
is currently ranked as 24th in Europe and thus the Scottish representation in UEFA tournaments looks like this:
Scottish teams participating in UEFA Tournaments
Scottish League Winner Champions league second Qualification round
Scottish cup Winner UEFA League second qualification round
Scottish league second place UEFA League first qualification round
Scottish league third place UEFA League first qualification round
Table 3.4 - SPFL teams participation in UEFA tournaments. Source: SPFL, 2015
It is worth noticing that winning the Scottish Premiership does not automatically guarantee a spot in Champions
League. This is due to the Scottish Premierships weak placement on the UEFA league ranking. However, the
league ranking may change over time based on how well Scottish teams perform in UEFA tournaments (UEFA,
n.d.). In 2007, the Scottish Premiership was ranked 13th
in Europe, which earned Scotland two spots to the
Champions League. Thus, the overall condition of Scottish football is important in terms of how probable it is for
a Scottish team to qualify for the lucrative Champion’s League. A full overview of how many teams that qualifies
for each UEFA tournament can be seen in appendix 2.
3.2.3 Celtic in the Scottish football industry
This section puts forth the strategic position that Celtic holds within the Scottish football industry.
As mentioned above, the Scottish football industry is limited to the twelve teams playing in the Scottish
Premiership. However, Rangers FC has also been included due to their significant size and historical impact on
Scottish football. Figure 3.1 below compares the teams in the Scottish league based on revenues in 2014 and
their UEFA club ranking.
Figure 3.1 clearly illustrate Celtics
dominating position within Scottish
football. With an operating revenue of
£64m, Celtic clearly stands out
compared to other Scottish football
clubs. Although Rangers are currently
playing in the second highest division,
they are still Celtics closest competitor
in terms of revenues with £24m. Celtic
is also dominating in terms of
footballing success, which is reflected in the UEFA club ranking (UEFA, n.d.). Celtic is currently ranked as 51 in
Europe.
Figure 3.1 - Overview of the Scottish football industry. Sources: Own creation based
on appendix 25

17
3.2.4 Celtic in the European football industry
Celtic is also a part of the European football industry through its participation in UEFA tournaments. This thesis
limits the European football industry to count for all football clubs that are participating in one of the two UEFA
tournaments. As a more thorough analysis of the European football industry will be provided in chapter 4, this
section provide a basic overview of how Celtic is positioned compared to their European competitors.
As figure 3.2 indicates, Celtics
strategic position is completely
different within the European
football industry compared to the
Scottish. High revenue growth
from broadcasting and
commercial activities among the
largest leagues in Europe, is the
main reason why Celtic is lagging
behind their European
competitors. The huge
differences in financial muscles
limits Celtics freedom on the player transfer market and makes it difficult to compete with these clubs. According
to a survey conducted by BDO (2014), chief executives both in Scotland and England expects the revenue gap to
increase in the future.
Chapter 4 - Strategic analysis
The main valuation method applied in this thesis is the DCF approach. This method needs forecasted costs and
revenues (cash flows) in order to find a fair value estimate. If the business environment were static, an analyst
would only need to gather historical data in order to forecast future outcome (Petersen & Plenborg, 2012, p187).
However, the world is not static and the business environment is constantly changing. Thus, we need knowledge
about the underlying non-financial and financial factors that may have an influence on the business environment
in order to make defendable predictions about the future. This chapter will analyse macro, industry, and
company specific factors that can have an impact on Celtics future cash flow potential and risks. The revenue
and cost drivers presented in table 3.2 and 3.3 should be kept in mind when reading the strategic analysis, as
only factors that may influence these are included in the analysis.
This chapter is structured based on a top-down approach suggested by Petersen and Plenborg (2012) (see figure
4.1). More throughout explanations of the applied frameworks will be given along the way.
Figure 3.2 – Celtic in the European football industry. Source: Own creation basen
appendix 26

18
Figure 4.1 - Strategic analyses - Top-Down approach. Source: Own Creation based on Petersen and Plenborg, 2012
4.1 PEST analysis
The primary objective of doing a macro analysis is to detect those macro factors that have the potential to affect
Celtics future cash flow potential. A common model when analysing macro factors impact on a company is the
PEST-model. This model covers Political and Legal (4.1.1), Economical (4.1.2), Sociocultural and environmental
(4.1.3) and Technical (4.1.4) factors that may influence Celtics future operations. The PEST model is not an
advanced model, but it is a good tool to systemize and categorize the relevant information (Petersen & Plenborg,
2012).
4.1.1 Political and legal regulations
Politics do not have much direct influence on a professional football club and therefore, the focus in this section
will be on the laws and regulations that can affect Celtics future cash flow potential and risk.
Celtic is a Scottish football club, and therefore has to follow regulations set by the SPFL board. Celtic is also
competing regularly in UEFA tournaments and thus all regulations made by the UEFA will be affecting the club.
The following regulation is believed to have the most impact on future cash flow potential and risks.
4.1.1.1 Financial Fair Play (FFP)
The regulation that has had the most impact on European football in recent years is the FFP regulations. FPP is a
set of regulations that every club participating in the UEFA tournaments have to follow. The regulation with the
most direct impact on the participating clubs is the break-even requirement (Grant Thornton, 2012). This
requirement hinders clubs from spending more money than they can generate (UEFA, 2015a). If a club does not
break-even over a two-year period, they will face sanctions in form of suspension from all UEFA tournaments
(Grant Thornton, 2012). The introduction of the FFP-regulations is a direct response from UEFA to stop the
development in the European football industry where clubs, despite increased revenues, have experienced
substantial financial losses (UEFA, 2015a). About one third of all clubs participating in UEFA tournaments showed
negative equity in 2010 (Forbes, 2012). UEFA gradually started to implement the FFP regulations in 2010, and
the 2013/14 season marks the first season where the regulations where fully implemented. This was as also the
first season where growth in revenues were higher than growth in wage expenses for two consecutive seasons
in European football (UEFA, 2015b, p61). The principal objectives of FFP as stated by UEFA (2015d) can be seen
in table 4.1.
Cash flow potential
and risk
External factors
4.1 Macro factors
(PEST)
4.2 Industry factors
(Porters 5 forces)
Internal factors
4.3 Company
spesific factors
(VRIO)

19
Principal objectives of the Financial Fair Play regulations
a) To improve the economic and financial capability of the clubs, increasing their transparency and
credibility.
b) To place the necessary importance on the protection of creditors and to ensure that clubs settle their
liabilities with employees, social/tax authorities and other clubs punctually.
c) To introduce more discipline and rationality in club football finance
d) To encourage clubs to operate on the basis of their own revenues
e) To encourage responsible spending for the long-term benefit of the club
f) To protect the long-term viability and sustainability of European club football
Table 4.1 - Principal objectives of the Financial Fair Play regulations. Source: UEFA, 2012
The implementation of the FFP regulations is expected to impact Celtics future operations in several ways. First,
the regulations forces Celtic to operate within their financial means and to produce positive financial results. It
has been argued that one of the main effects from FFP is that it represents a transfer of wealth from players to
owners (Peeters & Szymanski, 2014), which is positive from an investor`s point of view. The huge differences in
revenues between Celtic and the richest clubs in Europe, makes it difficult to compete with these clubs in terms
of signing the best football players. This forces Celtic to rely more on their own youth academy and to scout for
under-priced talents in the future, which is also UEFAs intention when implementing the regulations (Grant
Thornton, 2012). Celtics chief executive Peter Lawwell has stated that the club’s core business strategy relies
upon “…the youth academy; player development; player recruitment; management of the player pool…to deliver
long term sustainable football success” (Celtic Football Club, 2014a, p3). This indicates that Celtic understands
that they have to adapt their strategy to better fit with their strategic positioning within the European football
industry, the FFP regulations and the new business environment.
Average age 2007 2008 2009 2010 2011 2012 2013 2014
Purchased players 26,3 24,7 22,3 23,9 23,5 23,3 22,0 22,3
sold players 26,3 26,6 26,0 27,0 26,2 28,0 25,0 25,3
Table 4.2 - Average age of Celtics sold and purchased players. Source: Transfermarkt, 2015
Another area where the FFP regulations seems to affect Celtic is in the football transfer market. As it can be seen
in table 4.2, Celtic has begun to buy younger players, as their strategy is to develop the players and sell them for
a higher price after a few years. The average age of purchased players has gone down from 26,3 to 22,3 years
over the research period, and after the implementation of the FFP regulations in 2010, Celtic has mainly invested
in young players. Celtic is not the only club to adopt a business strategy more focused on developing youth
players and lowering spending in the transfer market. The mentioned BDO survey from 2014 indicates that 67%
of managing directors in Scottish premiership clubs intend to increase their youth-development budgets for the
upcoming season (BDO, 2014).

20
To sum up, FPP force Celtic to invest more in youth development rather than purchase expensive players with
high salaries. This development points in the direction of a higher profit from transfer activities and lower costs
in relation to buying players. At the same time, FFP makes it more difficult for Celtic to close the gap between
them and the best clubs in Europe (due to less freedom on the transfer market). Thus, it is unrealistic to forecast
any improvement in Celtics footballing performance in European tournaments.
4.1.2 Economic factors
Economic factors refers to macro-economic trends that impacts a company’s business environment (Johnson et
al., 2014, p37). In this section, GDP growth and unemployment rates will be analysed due to their proven
correlation with match attendance in the football industry. The development in prize money from UEFA has also
been included even though it is not a macroeconomic trend. This is because it is an economic factor out of Celtics
control, that has a direct impact on their earnings potential.
4.1.2.1 Real GDP Growth and unemployment rate
Studies conducted by Gjestvang and Reinhardsen (2015) and Mæle (2014) have concluded that macroeconomic
conditions such as GDP growth and unemployment rates have a significant impact on football match attendance
in the Norwegian Tippeliga. Mæle (2014) argues that unemployment rate is the variable with the highest
influence on match attendance over time.
Figure 4.2 – Historical attendance, GDP Growth and Unemployment rate. Sources: International monetary fund, 2015; European football
statistics, 2015
In line with Mæles (2014) findings, figure 4.2 show that unemployment rates and GDP growth correlates with
Celtics average match attendance during the time period 2006-2014. In 2009 the financial crisis hit the UK
economy hard and resulted in a negative GDP growth of -4,6%. The same year the average attendance at Celtics
home games decreased with more than 22%. Similarly, when the economy began to recover in 2010 and 2011
the average attendance grew. However, despite a positive GDP growth between 2012-2014, the average match
attendance has decreased. This development is believed primarily to be caused by the relegation of Rangers
from the Premiership, and thus a decreased interest among Celtic fans due to a lack of competition in the league
(Goal, 2015). Looking at the trend analysis in appendix 3, it can be seen that many of the smaller football leagues
in Europe has witnessed a similar trend; where attendance grew in the period leading up to the financial crisis
57943 56677 57928
45582 48978 50904 46917 44585
16194 15580 15530 13944 13670 13865 10022 10228
5,35% 5,50% 6,70% 7,90% 8,10% 7,98% 7,60% 6,20%
-15,00%
-10,00%
-5,00%
0,00%
5,00%
10,00%
0
20000
40000
60000
80000
100000
2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014
Celtic AVG Scottish AVG GDP Growth Unemployment rate

21
and followed by a decrease in attendance ever since. Appendix 3 indicates that Mæles (2014) findings of
correlation between attendance and economic conditions is of relevance also outside the Norwegian Tippeliga.
Unemployment and nominal GDP 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Terminal
UK Real GDP Growth 1,9 1,6 0,7 1,7 2,5 2,7 2,3 2,20 2,20 2,10 2,3
UK Inflation rate 3,3 4,5 2,8 2,5 1,5 0,06 1,5 2 2 2 2
UK Nominal GDP Growth 5,2 6,1 3,5 3,2 4 2,8 3,8 4,2 4,2 4,1 4,3
Europe Real GDP Growth 2,05 1,64 -0,28 0,17 1,42 1,8 2 2,0 1,9 1,9 1,94
Europe Inflation 1,98 3,11 2,64 1,53 0,66 1,1 1,5 1,6 1,7 1,8 1,64
Europe Nominal GDP Growth 4,03 4,75 2,36 1,7 2,04 2,9 3,5 3,6 3,7 3,8 3.6
UK Unemployment Rate 7,9 8,10 7,98 7,60 6,20 5,38 5,41 5,44 5,40 5,40 5,55
Table 4.3 Historical and forecasted GDP and Unemployment rates. Source: IMF, 2015
Another source of revenues that is influenced by macro-economic conditions is sponsor and commercial
activities. As it was pointed out in table 3.2 in section 3.2.1, sponsors and commercial activities is one of the
biggest revenue drivers in European football (Deloitte, 2015b). The overall economic conditions have a direct
impact on companies advertising budgets (Kotler, 2003, p149) and thus their willingness to sponsor a football
team (E24, 2009).
Table 4.3 shows data from the IMF`s latest “World Economic Outlook Report”, which provides information about
future economic growth (IMF, 2015). The numbers given for Europe are estimated based on countries included
in the European Union. These forecasts do not necessarily reflect the future, but the expected stabilization of
European/UK GDP growth and unemployment rate is likely to positively affect Celtics future revenues from both
sponsors and match day activities. IMFs forecasts will be used as inputs in the forecast provided in chapter 8.
4.1.2.2 UEFA prize money distributions
As can be seen in table 3.2, revenues from UEFA tournaments accounts for as much as 22% of all revenues
generated among Scottish football clubs. Since the distribution of UEFA prize money is out of Celtics control it is
important to understand how these revenues are earned. When UEFA arrange European tournaments, they
generate large revenues through commercial activities and the sale of broadcasting rights. About 75% of these
revenues are each year distributed back to the participating clubs, while the remaining 25% is kept by UEFA to
cover running expenses (UEFA, 2014a). The money is distributed to each individual clubs in two portions:
A) A fixed amount awarded according to how the team finished and performed in European tournaments
(Performance bonuses).
B) Through a pool where a part of UEFA`s TV income is distributed according to which league the team
comes from and number of matches played by the team (Market pool).
The performance bonus is relatively simple to calculate as it only depends on how well a team performs. The
market pool however is slightly more complicated. The market pool will be distributed according to the
proportional value of each TV market represented by the clubs taking part in the UEFA tournaments and be split
among the clubs participating from a given association (UEFA, 2015c). Both the Champions League and the UEFA

22
Europa League follow this distribution system. UEFA prize money is based on a three-year cycle, with the next
cycle starting from the 2015/16 season (UEFA, 2015, p44). The Champions League is the most prestigious
tournament arranged by UEFA and is also the most lucrative tournament to participate in. This can be seen in
the figure below. For a full overview over the inputs in figure 4.3, see Appendix 4a
Figure 4.3 show the historical
development in total prize money paid
out by UEFA. The figure also includes
forecasts given by UEFA for future pay-
outs until 2018 (UEFA, 2015c). It is
worth noticing the large increase in
prize money from the 2015/2016
season both in the Champion`s League
and in Europa League. The rapid
growth in pay-outs over the period is
caused by an increase in revenues
from broadcasting rights and
commercial partners (UEFA, 2015e).
4.1.2.3 Interest rate and currency risk
Celtic is facing interest rate risk on its borrowings and especially on its bank overdraft, which interest rates are
floating (Celtic Football Club, 2014a). Celtics long term loan can however be locked in and the Celtic board states
that: “In times of interest rate volatility, executive management take advice as to the various instruments that
may protect the Group and Company against increased costs” (Celtic Football Club, 2014a, p55). Celtic is also
facing exchange rate risks due to the high amount of prize money and transfer income, which often is stated in
Euros and thus have to be exchanged into Pounds. However, Celtic seem to deal well with these risks by using
financial instruments such as interest rate caps, hedging and forward contracts (Celtic Football Club, 2014a).
4.1.3 Social and cultural factors
4.1.3.1 Demographics
Socio-cultural factors include changing demographics and cultures (Johnson et al., 2014, p37). Since Celtic has
most of their fans in Glasgow, the demography of Glasgow can affect the underlying demand/customer base
(Petersen & Plenborg, 2012). According to future population projections, total inhabitants in Glasgow is expected
to grow with 0,6% annually until 2037 (Understanding Glasgow, n.d.). This means that Celtics potential local
customer base is expected to stay rather stable and do not have much influence on forecasted revenues.
4.1.3.2 Globalization
The world is becoming increasingly international and globalized. This means that it is becoming easier for Celtic
to distribute their products to a broader audience. This is especially relevant for Celtic because of their Irish origin
and the many Irish emigrants around the world, which can be seen as potential customers.
Figure 4.3 – Historical and forecasted UEFA prize money distribution in €000.
Source: Appendix 4a

23
4.1.4 Technological factors
Technological factors refer to innovations with direct or indirect effect on the current business environment
(Johnson et al., 2014, p37).
4.1.4.1 Broadcasting:
In terms of how people watch football and how it is distributed to the customer, there has been and will continue
to be technological developments. A few years ago, only one football match was picked as so-called TV-match
each weekend. Back then going to the stadium was the only way supporters could watch their team play. Today,
almost every game is broadcasted and the viewer can even choose if he/she wants to watch it on his TV, tablet
or even his smart-phone. These new technologies provide supporters with more flexibility and freedom.
However, new broadcasting technology has two different effects that work in opposite directions when it comes
to a football clubs revenue generation:
Increases commercial potential:
New technology helps spread football to a broader audience. For example, thousands of football fans both in
Asia and America is watching European football regularly. Table 3.2 indicates that Football clubs revenue has
benefitted much from the increased broadcasting. Commercial revenues is also growing due to the increased
exposure football clubs get through more televised games etc. Broadcasting revenues has grown by 45% the last
5 years among all European football clubs. Distribution to a larger audience has also contributed to the 46%
increase in revenues obtained from sponsor and commercial activities over the same period (UEFA, 2015b, p56).
Decrease in attendance:
On the other hand, new technology and more broadcasting is not necessarily positive for all football clubs,
especially those in smaller leagues with less broadcasting and commercial potential. According to Allan and Roy
(2008) broadcasting of Scottish football matches on TV has had a negative effect on experienced attendance at
the stadium. Section 4.1.2 pointed out that SPFL and Celtic has witnessed a decrease in attendance in recent
years and even though the overall economic conditions will have to take most of the blame, increased
broadcasting is also believed to be of relevance (Allan & Roy, 2008).
So far, the new technological developments seem to only have benefited the largest leagues in Europe. The
English Premier League for example, is the most attractive league in the world, which means that new
broadcasting technology has an enormous potential in terms of sponsor and commercial revenues as well as
revenue from selling broadcasting rights. These extra revenues are so large that the clubs can afford a potential
drop in attendance. For Scottish football clubs however, the extra income from increased broadcasting is more
than offset by the decrease in ticket sales and other match day revenues (Allan & Roy, 2008). For Celtic, the effect
is divided. While Celtic benefits from the increased broadcasting revenues that UEFA are distributing to
participating clubs (as seen in figure 4.3), Celtic is also affected negatively from the drop in attendance on their
domestic league games.

24
4.1.4.2 Multimedia:
Several multimedia devises such as smart phones, tablets etc. has made it possible for companies to reach out
to a broader audience then what was possible only a few years ago. For instance, Celtics Facebook page has 1,4
million followers (Facebook, 2015), more than twice the total population of Glasgow. Multimedia helps brand
the club without them having to invest anything in marketing. This type of communication between the
club/players and the fans comes with a huge marketing potential. However, how multimedia will impact on
Celtics revenues is not yet fully clear.
All in all, technological developments have increased the earnings potential for the football industry as a whole
by increasing distribution of the footballing product, increased marketing opportunities and by reaching out to a
broader audience. However, how much the technological development benefits each individual club differs from
league to league. Most clubs in smaller leagues are not yet benefitting from the technological development since
the increase in commercial and broadcasting revenues are more than offset by a decrease in attendance (Allan
& Roy, 2008).
4.2 Porter’s Five Forces - Industry factors influencing cash flow potential and risk
The attractiveness of an industry is a result of the possibility
of earning an acceptable return i.e. return equal to or above
the cost of capital (Petersen & Plenborg, 2012, p189). An
industry can be expressed as a group of firms producing
similar goods or services (Johnson et al., 2014, p34). Porter
(2008) argues that the root cause to either positive or
negative earnings, can be explained by substantial analysis
of the forces in his Five Forces model. These forces are: a)
threats of new entrants, b) threat of substitutes, c )the
bargaining power of suppliers and d) the bargaining power
of buyers and competitive rivalry (Johnson et al., 2014; p42).
In this analysis, the emphasis will be placed on both the
Scottish and the European football industry, as these are the
markets Celtic operates within.
4.2.1 Threats of new entrants
An analysis of potential entrants gives valuable knowledge
and understanding of the threats of new players in the industry (Petersen & Plenborg, 2012 p189). The easier it
is for new competitors to enter the industry, the higher the threat of entry. The higher the threat of entry, the
less attractive an industry (Johnson et al., 2014, p45). New entrants affect returns negatively as they generally
bring new capacity and a desire to gain market shares (Petersen & Plenborg, 2012, p189). Both the Scottish and
the European football industry are relatively fixed, since the only way new clubs can enter the market is trough
promotions/qualifications.
Existing
competition
Threat of
new
entrants
Buyers
bargaining
power
Threat of
substituts
Suppliers
bargaining
power
Figure 2.4 Porters five forces. Own creation

25
4.2.1.1 Threat of new entrants in the Scottish football industry:
The only way someone can enter the market is trough promotion from lower divisions. However, there are only
two new clubs promoted each season and it takes time to develop a team that can challenge the existing
competition. To establish a new team in the top division would also require strong financial backing, which makes
it difficult for new teams to enter the industry. The FFP regulations increase the entrance barriers further due to
the break-even requirement. Thus, there is not a high risk of new entrants in the Scottish football industry.
However, the anticipated return of Rangers to the top division in 2016 is expected to increase the
competitiveness in the Scottish Premiership (Vice Sports, 2015).
4.2.1.2 Threat of new entrants in the European football industry
The European football market is fixed in terms of how many teams that are allowed into UEFA tournaments each
year. The previously mentioned gap between rich and poor clubs in the European football industry is expected
to make it even harder to enter the European football industry in the future (Deloitte, 2015b).
Another aspect that makes it difficult to enter the football industry is the high switching costs. Football fans
would not simply switch from their old team to a new one, and building up a fan base would take long time.
Based on the above the European football industry does not seem to be facing a high risk of new entrants.
4.2.2 Buyers bargaining power
The customers bargaining power will always be of relevance for a company’s potential return in a given industry
(Petersen & Plenborg, 2012, p190). The size and the quantity of customers is usually what determine their
bargaining power. A large group of small customers have a relatively small degree of bargaining power, while a
small group of large customers will be more powerful (Petersen and Plenborg, 2012, p190). Three main customer
groups are identified in this thesis: the supporters, the media and the sponsors.
4.2.2.1 Supporters
This customer segment consists of a large group of small customers. Football supporters mainly generate
revenue through purchase of tickets, food and beverages, and merchandising products. What differentiate this
group form other groups of small customers, is their collectiveness. Football supporters tend to be organised in
supporter clubs, which increases their bargaining power dramatically since they often operate as a collective
unit. We cannot however, place all supporters in the same customer segment. Football clubs tend to have a
divided fan base. One part of the fan-base consists of those fans that attends every match, buys the supporter
effects and supports the team no matter what. These supporters can be categorised as “hard-core fans”. This
group is emotionally attached to their favourite club and thus has a high substitution cost, which limits their
bargaining power. The rest of the supporters, are fans that watch the games as entertainment more than
anything else, often on TV and they don’t spend as much money on supporter effects (Social Issues Research
Centre, 2008). To attract these supporters, the relative quality of entertainment (how the team perform, comfort
and prices) is more important. These fans have a higher degree of bargaining power because their substitution
cost is much lower than that for the “hard core fans”. Supporters bargaining power is rather similar between the
European and Scottish football market, as football supporters tend to have the same underlying characteristics
in most countries (Social Issues Research Centre, 2008).

26
4.2.2.2 Media
The second customer group is the media. The media in this case relates to the institutions that buy the
broadcasting rights to show televised football games. The national football associations usually sell footballing
TV-rights centrally in each domestic league and distributes those revenues back to the clubs. In terms of the
bargaining power between the football associations and the TV companies, it all comes down to the
attractiveness of the product and the numbers of broadcasters that want to but the rights (UEFA, 2015b, p43).
The broadcasting rights for Scottish football were renewed by broadcasting partner SKY in 2015 and is worth a
total of £15m a year until the end of the 2019/20 season (BBC, 2015b). This is just a fraction of the £1,7bn a year
that their English neighbours got for selling the rights to the English Premier League the same year (BBC, 2015c).
A fine way to illustrate the difference in bargaining power between the football associations and the media in
Scotland and England is to look at broadcasting revenue per capita. The domestic broadcasting rights in England
yields a revenue per capita of €35 versus only €5 in Scotland (UEFA 2015b, p43). Furthermore, as shown in table
3.2 in, revenues from broadcasting accounts for 34% of total revenue for all clubs in European football, while the
same number is only 14% for the Scottish Premier League. The large differences shows that the Scottish
broadcasters have a lot more bargaining power, compared to the broadcasters in the European football industry
and thus can push the price of Scottish football down.
4.2.2.3 Sponsors
The last customer segment is the sponsors. Most football clubs have several sponsor agreements of different
size and importance where the most important sponsor usually relates to shirt manufacturers and shirt sponsors
(UEFA, 2015b). The bargaining power of sponsors is usually determined by how many potential sponsors that
exist (overall economic conditions) and the attractiveness of the product being sponsored (quality of the football
product). Statements like “Overall, the sponsorship landscape remains extremely challenging. The existing
business environment and economic difficulties continue to impact upon companies advertising and marketing
budgets.” (Celtic Football Club, 2014a, p8) indicates the difficulties among Scottish football clubs to find lucrative
sponsors. The difficulties can be seen in a survey conducted by BDO where all of the asked financial directors in
the SPFL agreed that the sponsor market will be more challenging in the future (BDO, 2014). This increases
sponsors bargaining power in the Scottish football industry. In European football however, the sponsor market
has never been hotter. As pointed out in table 3.2, European football clubs have increased revenues from
sponsorship and commercial activities by more than 46% on average over the past 5 years. The long line of firms
willing to sponsor the best teams in Europe, have decreased the sponsors bargaining power.
While Celtic is affected positively from the booming sponsor market in European football (UEFA, 2015b), they
are also affected negatively by the slow sponsor market in Scotland (BDO, 2014). Overall customers have a great
degree of bargaining power in the Scottish football market, especially the sponsors and media. The huge
increases in revenues from sponsors and broadcasters in the European market, point in the direction of lower
bargaining power of buyers in the European football market.

27
4.2.3 Threats of substitutes
Substitutes resemble the product offered in the industry in the way that they offer the same or similar benefit,
but have different nature (Johnson et al., 2014, p45). Football is an entertainment product and typical substitutes
are other types of entertainment such as sports, cinema, film, etc. The threat of the substitute depends on
switching costs, product differentiating and price/performance relationship among others (Petersen & Plenborg,
2012).
4.2.3.1 Switching costs
The switching costs in both the European and the Scottish football industry, is seen as high due to the emotional
aspect of football supporters as explained in section 4.2.2.1 supporters. This decreases the overall threat of
substitutes. Other entertainment products are not seen as a fully comparable product for a “hard-core football
supporter”.
4.2.3.2 Product differentiation
All football teams can be said to sell a unique product due to the individual clubs background and history. People
from Scotland hardly find Norwegian football exiting and a Rangers fan would never go watch a Celtic match,
even though the footballing quality of the game is rather similar. This speaks in favour of a differentiated product
and thus low threat of substitutes in both the European and Scottish football industry.
4.2.3.3 Price/performance ratio
Scottish football has been criticised recently for charging too high prices for the relatively low quality of football
they are offering (Duncan, 2014). The tickets for UEFA tournaments do not cost much more than average league
tickets in Scotland even though the quality of the product arguably is much higher (Kajumba, 2015). This point in
the direction of a higher price/performance ratio in Scotland compared to Europe.
Overall, the threat of substitutes is relatively low in both industries. However, a much lower price/performance
ratio in the European market decreases the threat further. UEFA tournaments are the best club tournaments
available and thus has a lower threats from substitutes compared to the Scottish Premiership, which charges
almost the same price for a product of much lower quality.
4.2.4 Suppliers bargaining power
An analysis of the bargaining power of suppliers provides the analyst with an understanding of the relative
strength of suppliers (Petersen & Plenborg, 2012, p190). If a supplier has the bargaining power over the
participants in an industry, they can squeeze the profitability of the industry by raising the prices of the products
or services they deliver (Petersen & Plenborg, 2012). In the football industry it is the football players themselves
that are the main suppliers as they sell their football skills to clubs by signing player contracts. A player’s
bargaining power is made up by a combination of factors such as the level of interest in the player from other
clubs, recent performance, remaining time on his contract and to what extent the player is an important player
for the team. The best players are more attractive to other clubs and thus have more bargaining power when

28
negotiating over contracts. A good indication of the bargaining power of football players can be seen by look at
the development in football player’s salary level as well as salaries as % of revenues.
4.2.4.1 Player salaries
Increased revenues in European football, combined with a growing footballing agency industry, have led to a
massive growth in wages the last two decades. According to UEFA (2015b) total wage payments by UEFA
participating clubs has gone up with as much as 664% over the last 19 years. This gives a growth rate in salaries
of more than 10% annually. In comparison, the economic growth in Europe has just been 1,5% per year for the
same period (UEFA, 2015b). One could believe that this would squeeze the profitability of the European football
industry, however, the average wage/revenue ratio has actually decreased the last decade, meaning that the
growth in revenues outpaces the growth in salary costs (UEFA, 2015b). The enhanced potential to generate large
revenue in football trough on-field success has also increased the interest among clubs to sign the best players
possible. The financial gains of doing well in UEFA tournaments has become so high that clubs stretches their
wage budgets in order to secure quality players. The increased competition on the transfer market has also
increased players bargaining power. Especially the English Premier League forces the wage bills up, according to
The Daily Mail (2014), the average salary in English premier league is 80% higher than in Germany and 1300%
higher than in the Scottish premier league. The huge growth in wages shows an increasing bargaining power
among football players in the European football industry. This has of course an effect on the Scottish football
market since the best players can move to bigger leagues and earn higher salaries if Scottish clubs cannot match
the offers.
Overall, football players as suppliers can be said to have a high degree of bargaining power. Their salaries tend
to correlate with the revenues in the industry, which works negatively on a football clubs profit potential. The
best player’s tend to play on the best teams, which means that the suppliers bargain power is higher in the
European football market compared to the Scottish.
4.2.5 Competitive rivalry
An analysis of the existing rivalry within an industry provides the analyst with an understanding of the level of
competition. Usually, strong competition has negative effect on returns (Petersen & Plenborg, 2012). In the
football industry however, increased competition also tends to come with advantages since club from leagues
with high competition often is more interesting to their customers. Clubs In for England for example, benefits
financially from selling their games as Premier League matches where they face the best teams in the world. As
pointed out in table 3.2, broadcasting rights and commercial income has become an important source of revenue
for professional football clubs, and these revenue streams benefits from increased competition because it
improves the product they are selling. Celtic has finished top two in the Scottish premiership the last 30 years
and it is evidential that the Scottish premiership lacks competition. After Rangers FC was relegated from the
Scottish premiership, the absence of competition in Scottish football has been obvious. According to Celtics chief
executive, the fact that Rangers were relegated has a negative effect on Celtics earnings, stating that “We could
have lost £10 million a year, quite easily, on the back of Rangers going down" (Lindsey, 2015) Another person
with great insight to Scottish football is Celtics former manager Neil Lennon (Celtic manager between 2000-

29
2007). He stated earlier this year that: “It’s essential for the game in Scotland that Rangers get back to the
Premiership as quick as possible. They need to get back… for the state of the game up there – in terms of revenue,
crowds and competition” (Goal, 2015). The rivalry in the European football market is of course much harder
which again increases the popularity of the game and generates interest and increased revenues from sponsors,
ticket sale and broadcasting. Lack of competition in the Scottish Premiership affect Celtic in two different ways.
On one hand, the lack of competition have a negative effect on revenue streams generated from commercial
activities, TV-rights, match day revenues etc. On the other hand, Celtic are always favourites to win the Scottish
League and qualify for UEFA tournaments, where they generate revenues through prize money.
4.2.6 Summary of Porters Five Forces analysis
Figure 4.5 provide an overview over the
industries that Celtic FC is operating
within. The Scottish football market is
seen as a less profitable market than
the European, mainly due to the high
bargaining power of buyers (media and
sponsors) in the Scottish industry. The
barriers to entry are high in both
markets, but remarkably higher in the
European market due to the tough
qualification system and the amount of
capital required to build a team of that
quality. Suppliers bargaining power is
higher in the European market than the Scottish. This has to do with the quality and thus the attractiveness of
the players in the European football industry. Better and more talented players have more bargaining power due
to the high interest in the player from competing clubs. The threat of substitutes is higher in the Scottish football
market. This comes down to the price/performance relationship since the level of Scottish football has dropped
over the period, while the prices has remained rather stable. Finally, the rivalry, which arguably can be said to
be a positive thing for a football industry, is much higher in the European than the Scottish football market. This
makes the European football more competitive and interesting to customers such as media and broadcasters.
4.3 VRIO-analysis
To make a thorough assessment of Celtics market position in the Scottish as well as the European football market,
it is important to make an internal analysis of Celtics strengths and weaknesses. In order to make the analysis,
the VRIO-framework has been used. The VRIO framework is a structured way to look at how a company can
utilize its available resources in order to create sustained competitive advantages in an industry. This section
covers those resources that are assumed to have the most impact on Celtics future cash flow potential. Table 4.5
at the end of this chapter sums up Celtics most important competitive advantages.
Figure 4.5 – Summary of Porters Five Forces. Source: Own creation based on findings
from chapter 4.2
0
2
4
6
8
10
Entry
barriers
Buyers
bargaining
power
Suppliers
bargaining
power
Threats of
substitutes
Rivalry
Scottish football
market
European football
market

30
The different aspects in the VRIO-framework (valuable, rarity, inimitability and organizational support) are all
considered as necessary in order for a resource to be considered as a sustained advantage (Johnson et al., 2014,
p76).
VRIO Analysis
Valuable: In order for a resource to be valuable there are three criteria that needs to be fulfilled, these are;
taking advantage of opportunities, the resource is perceived as valuable to the costumer and costs.
Rarity: The resource needs to be rare, meaning that it is difficult/impossible for competitors to get their hands
on the same resource.
non-Imitable: Complexity and culture/history are two factors that can make a resource non-imitable. These
firm specificities can make it difficult or costly for a competitor to imitate, acquire or substitute a resource.
Organizational support: The organization need to be structured in a way that allows the company to capitalize
from the advantage of holding the resource.
Table 4.4: features for a sustained comparative advantage. Source: Own creation based on Johnsen et al, 2014.
4.3.1 Celtic Park:
Celtic fully owns Celtic Park and thus keeps every penny that the stadium generates in terms of revenues. Not all
football clubs benefits from this advantage. Many clubs leases their stadium from a third party, which reduces
the opportunity to generate money from match day activities. In addition to Celtics home games, Celtic Park also
hosts the SPFL league cup final, the Scottish cup final, seminars and VIP events, all of which creates extra
revenues (Celtic Football Club, 2014a). As seen in figure 4.6, there is no other stadium of the same size and quality
in Scotland other than Rangers “Hampton Park”. The large stadiums gives these two clubs an advantage due to
increased earnings potential from match day and other stadium activities. It is not realistic that any other Scottish
team will be able to build a similar stadium in the near future.
Figure 4.6 - Stadium capacity in 1000. Source: The Stadium Guide, 2016
81 81 76 60 54 51 49 42 41 21 20 18 18 14 11 8
0
20
40
60
80
100
Capasityin1000

31
Celtic Park is seen as a sustained competitive advantage in the Scottish football industry. On a European scale
however, Celtic Park is the 18th largest stadium (The Stadium Guide, 2016), and the stadium is therefore not
seen as a competitive advantage in the European football industry.
4.3.2 Strategic management:
A strong strategic management can have a huge impact on a clubs long-term performance both on and of the
pitch. Time after time football clubs have ended up in financial distress due to overspending and short-term
strategic management. Celtics board of directors shows trough statements like “Celtic should have a football
operation with a self-sustaining financial model, relying upon; youth academy; player development; player
recruitment and management of the player pool” (Celtic Football Club, 2014a, p5) that they are adapting to a
transfer policy which fit within the FFP. The fact that Celtic is dominating Scottish football at the same time as
they manage to have a positive football transfer result shows that Celtic is following their core business strategy
successfully. Celtics transfer activities will be covered more in debt in the financial analysis in chapter 5. Good
strategic management can be seen as a competitive advantage that gives Celtic a better chance of obtaining
future profit, but it cannot be classified as a long-term advantage. The Board of directors and managers are
changed too often in modern football to do so.
4.3.3 First team squad:
A strong first team squad is both rare and important. Important because it is the foundation of the product that
a football club is selling to its customers. Rare because a solid first team squad is hard to put together and players
of a high quality is difficult to develop and expensive to purchase. As figure 4.7 indicates, Celtics first team squad
is in its own league compared to its Scottish competitors.
Figure 4.7 Market value of first team squad 2014/15. Source: Transfermarkt, 2015
Figure 4.7 is based on numbers taken from Transfermarkt.com and depicts the market value of Celtics first team
squad compared to its largest Scottish competitors, as well as some of Europe’s biggest clubs. The figure shows
that Celtics first team squad is worth six times as much as its closest Scottish competitor. However, it is not
impossible for other Scottish clubs to imitate this by signing/developing quality players. It would be expensive,
but not impossible. Thus, a strong first team squad should only be considered a short-term comparative
714
408 393 337 308
120 93 66 10 10 10 10 9 9 5 4
0
100
200
300
400
500
600
700
800
playersmarketvalue

32
advantage in the Scottish football industry. In the European football industry however, Celtics first team squad
has one of the lowest market values and their first team squad is seen as a weakness rather than an advantage.
Celtics current first team squad gives reason to believe that Celtic will remain on top of the Scottish premiership
and deliver solid performances in SPFL in the forecast in chapter 7. In UEFA tournaments on the other hand,
Celtics first team is on paper much weaker than most of its competitors (Transfermarkt, 2015).
4.3.4 Youth academy:
“The development of our young players remains a fundamental part of the clubs strategy”
(Celtic Football Club, 2014a, p9)
It was pointed out in section 4.2.4.1 that both transfer fees and salaries are increasing rapidly in European
football, much due to increased broadcasting and commercial revenues among the richest clubs. This makes the
development of young talents more important to clubs in smaller leagues that don’t have the financial mulches
to compete for players in the transfer market. The importance of a strong youth academy can be seen in a survey
conducted by BDO (2014) where 57% of financial directors in the Scottish premiership say they will increase their
youth development budget for the next season. As mentioned in section 4.1.1.1 the FFP regulations increases
the need for a strong youth academy in order to develop quality players without spending reckless amounts on
the transfer market. During the 2013/14 season, as many as seven players from the clubs youth academy played
regularly for the first team (Celtic Football Club, 2014a, p9). It can be argued that Celtic has the most successful
youth academy in Scotland as their development squad in 2014 won the U20 league for the fifth time in a row
(Celtic Football Club, 2014a). The fact that Celtic has the best youth academy in Scotland helps attract new young
talents regardless of geographic origin. Celtics youth system has been built up over decades which make it
difficult to imitate. Fostering new players through youth development appears important for clubs like Celtic,
who depend on income from transfer activities to stay profitable in a period where match day and other core
revenues are dropping. Celtics strong youth academy is expected to have a positive effect on future profit from
transfer activities as well as keeping salaries at an acceptable level, as young players usually demand less salaries
than more established players. While it do exist other clubs in Europe who have strong traditions when it comes
to developing new talents, these clubs are the exceptions rather than the rule. Thus Celtics youth academy can
be categorized as a long-term sustained comparative advantage.
4.3.5 The Celtic fans:
A solid crowd is often said to be a team’s 12th man, and a large fan base can be an important source of income.
The average attendance at Celtic matches is much higher than that of other Scottish clubs, and the numbers are
high even on a continental basis. Such an advantage is not easy for competitors to imitate, as a strong supporter
culture takes years to develop and is based on both the geographical origin and history of Celtic FC. The fact that
Celtic is of Irish origin and thus has fans with Irish background all over the world differs the Celtic fans from
almost all other football supporters in the world. Celtics fans have been ranked among the best supporters in
the world of football several times (Sport Witness, 2013). Celtics fan base helps make the forecasts of attendance

33
and merchandising sale more stable than what would be the case for other Scottish football clubs. Based on the
above, Celtic’s fan base is categorised as a long-term competitive advantage.
4.3.6 Brand name:
Celtic states in their annual report that: “Celtics sponsorship landscape remains extremely challenging” (Celtic
Football Club, 2014a, p8). Despite this however, the club continues to pursue new business opportunities both
at home and abroad. As an example, Celtic just signed a new sponsorship deal with the sports brand New Balance
for a reported sum in the area of £5.8m compared to Celtics previous deal with Nike, which was worth £5m (The
Daily Mail, 2015; The Swiss Ramble, 2015). New Balance general manager explains the reasoning behind choosing
to sponsor Celtic as: “…Celtic fans are everywhere in the world and as a brand we want to be with them and the
club hand in hand going forward” (Boston Globe, 2015). Statements like this shows what a solid brand name like
Celtic can be worth in the sponsor market. Celtic is an old club and has been a top contender in European football
for almost a century. It has taken Celtic decades to build their brand name and it will take any other team in
Scotland years of dominance to get their brand name to the same value as Celtics. A strong brand is an important
advantage in terms of attracting sponsors, fans and new players to the club and is therefore classified as a long-
term sustained advantage. As such, Celtics brand name is expected to have a positive effect on future revenues
from sponsors and commercial activities.
4.3.7 Conclusion VRIO analysis
Valuable Rare Non-imitable Organized Result
SCO/EU SCO EU SCO EU SCO EU SCO EU SCO EU
Celtic Park Yes Yes Yes No Yes No Yes Yes SCA NO advantage
The fans Yes Yes Yes Yes Yes Yes Yes Yes SCA SCA
Brand name Yes Yes Yes Yes Yes Yes Yes Yes SCA SCA
Youth academy Yes Yes Yes Yes No No Yes Yes TCA TCA
Strategic management Yes Yes Yes Yes No No Yes Yes TCA TCA
First team squad Yes No No No No No Yes Yes TCA Dissadvantage
Table 4.5 Summary of VRIO analysis Source: Own Creation based on findings in section 4.3
Based on the above findings, Celtic have 3 resources that can give the club long-term sustained competitive
advantages (SCA) in the Scottish football industry. These three resources are; the Celtic fans, the clubs strong
brand name and the ownership of Celtic Park. The analyses also show three resources classified as temporarily
competitive advantages (TCA). These are Celtics youth academy, strategic management and first team squad.
When it comes to the European Industry, Celtic park is not unique and cannot be classified as a sustained
advantage. In addition, Celtics first team squad is seen as a disadvantage rather than an advantage due to Celtics
relatively weak first team squad compared to other UEFA participating clubs. In summary the mentioned

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