Sports Sponsorship as a Strategic Investment in China: Perceived Risks and Benefits by Corporate Sponsors Prior to the Beijing 2008 Olympics

Article excerpt

Abstract

The purpose of this study is to examine the application of sports sponsorship in China, particularly to gain some understanding of the benefits as perceived by corporate sponsors. In-depth interviews were conducted with 19 sports sponsorship experts in China. The results provide insights into how sports sponsorship works in this emerging market.

Keywords

sports sponsorship strategic marketing People's Republic of China

Executive summary

There have been few attempts to examine how sports sponsorship works in the context of Chinese culture and economics. Most research (e.g. Cornwell, 1995; Farrelly et al, 1997; Gwinner & Eaton, 1999; Lapio & Speter, 2000; Meenaghan, 1991) has focused on markets in North America, Europe, Australia and to some extent Japan, all highly developed capitalist countries. As a result, mainstream sponsorship theories and frameworks are built on the foundation of a highly commercialised market and related systems of social and cultural values. China, with its unique history and cultural background, provides a very different market for sports sponsorship. There is, however, little research to address such uniqueness and identify ways in which international and domestic corporations perceive and act on the opportunities for sponsorship investment in China.

The researchers of this study used a two-stage methodology to address the research questions -document analysis and interviews. For the document analysis, more than 108 documents were gathered and analysed. A series of partially-structured in-depth interviews were conducted with 19 experts in sports sponsorship in China. This Included seven experts from various government organisations dealing with sports sponsorship, and 12 corporate senior managers representing 11 corporations that have invested in sports sponsorship in China. They were representatives of the most experienced authorities in sports sponsorship in China.

The results of the study conclude that corporate sponsors view sports sponsorship as a strategic investment. They believe strongly that sports sponsorship helps build not only brand equity, but also relationships, networks and alliances. Relationship is by far the most important element in business dealings in China. The study also examines the concomitant risks perceived by corporate executives in sports sponsorship in China. Five types of risks are identified. They are poor execution, inadequate investment in leveraging, sports performance fluctuation, termination cost and opportunity cost. The lack of trained professionals in sports sponsorship and policy changes are viewed as reasons behind the poor execution. Surprisingly, cultural differences are not considered as barriers for international corporations to sponsor sport in China. The study has direct implications for corporations wanting to invest in sports sponsorship in China.

Introduction

Sports sponsorship has, in a relatively short period, developed into a major industry in the global marketplace (IEG, 2004), and the People's Republic of China (hence China) is no exception. The Chinese sports industry is growing very rapidly. Many international sports events now have a presence in China. For example, the 2008 Olympic Games was held in Beijing and Shanghai has hosted a Formula One Grand Prix since 2004. Lenovo was the first Chinese company to become an Olympic worldwide partner, paying $65 million for the rights in 2004 (Wang, 2004). In the same year, China's largest petrochemical Corporation, China Petroleum & Chemical Corporation (Sinopec) signed a long-term sponsorship agreement with Allsopp, Parker & Marsh (APM) to obtain exclusive sponsorship rights to the Chinese Grand Prix (Xinhua Online, 2004). Between 2004 and 2005, Bank of China and seven other domestic corporations, along with Adidas, Volkswagen and Johnson & Johnson, became Beijing 2008 Partners (People's Daily Online, 2005). …