Sport Business in Brazil Management Essay

The Brazilian city of Rio de Janeiro is scheduled to hold the forthcoming 2016 Olympics, which is the first Olympics on the South American continent. In 2014, Brazil already held the FIFA World Cup. The devotion to these sporting mega-events implies that the country, as well as the City of Rio de Janeiro, will have to work hard. Having hosted one mega-event, the capabilities of the country have already been put to the test.

MEGA SPORTING EVENT – RIO DE JANEIRO OLYMPICS

The 2016 Olympics will be an opportunity for Brazil to avoid some of the challenges experienced during the preparations for the FIFA World Cup. The mega-event refers to a large-scale event of a worldwide significance, which usually attracts people from almost all corners of the world. The ability of these events to attract millions of people has both negative and positive effects. The 2016 Rio Olympics can boost the economic development of the region if correctly managed. For Brazil, holding the Olympics is similar to taking a business risk in order to earn the benefits of the investment. On the other hand, if poorly managed, the event is likely to become a burden to the host country and cause losses. Effective management and preparation of the sporting mega-events can guarantee success and profits. However, the hope is that the 2016 Rio Olympics will contribute to the economic growth of Brazil. The management of a sporting mega-event requires consideration of the three crucial issues: the infrastructure of the hosting nation, the security of the hosting country, and financial capability of the organizing body, as well as that of the hosting country. This paper discusses the present situation of Brazil and analyses the management of the event. The crucial aspects of the management that will be considered include the infrastructure, security, and financing.

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Current Situation of Brazil

Brazil has been classified as one of the fastest developing economies (Andersson, Armbrect & Lundberg 2008). The country reported considerable development and growth in the last decade despite being hit by the global economic downturn. Nowadays, it is a leading country both in Latin and South America in terms of the economic growth. Moreover, it is among the ten largest world economies (Atkinson et al. 2008). Because of the constantly improving economic growth and global status, Brazil was awarded both the 2014 FIFA World Cup and the 2016 Summer Olympics Games. The groundwork for the Rio de Janeiro Olympics has started. Brazil has the chance of learning from the failures and successes of both Greece and Barcelona in hosting the mega events (Walker et al. 2010). Greece is a clear example of the failure in hosting the mega event while Barcelona is an example of success. According to Fourie and Santana-Gallego (2011), the ambitions of holding the Rio Olympic Games might interfere with the continuous economic growth that the country is hoping. The research has shown that the economic effect of mega-events can be smaller in the developing countries than in the industrialized economies. There is no doubt that the Olympics will create the tourism demand and employment opportunities; it will also strengthen the Brazilian economy to a significant extent.

The job opportunities are imminent following the forthcoming 2016 Olympics. The Brazilians living in Rio de Janeiro expect an increase in the labour market with the demand for workers for constructing the Olympic facilities (Curi, Knijnik & Mascarenhas 2011). However, the experience of Greece has demonstrated that the overall benefits from the increased tourism traffic will primarily affect the wealthy. The historical analysis of the sporting mega-events have also shown that the development is very uneven and seems to benefit the construction interests and private developers while the leisure sites are developing only for the rich (Walker et al. 2010). According to Haddad and Hahhad (2010), the overall benefits might not influence the middle class and bottom-of-pyramid (BOP) Brazilians without effective management of the sporting mega-events. Consequently, there is an outright necessity to plan regularly, exploit the positives, and counteract the negatives. According to Maennig and Zimbalist (2012), planning and organizing are indispensable in making Brazil benefit from the 2016 Rio de Janeiro Olympics.

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Infrastructural Capacity of Brazil to Host the 2016 Olympics

The management of sporting mega-events requires an evaluation of the infrastructural capacity of the city/country to hold the events. The International Olympics Committee (IOC) expressed their doubts concerning the infrastructural capacity of Rio de Janeiro to host the Olympic Games (Curi, Knijnik & Mascarenhas 2011). The infrastructure refers to the basic ultimate facilities and systems serving the city of Rio de Janeiro. These facilities include the transportation, communication, and power systems among many others. In a typical corporate world, businesses also require these facilities to thrive. The infrastructural capabilities of Brazil were tested by the 2014 FIFA World Cup. Even though Rio de Janeiro hosted some of the matches, it cannot be concluded that the city has adequate facilities for the mega-event. Unlike the World Cup, which takes place in multiple cities, the Olympics takes place in a single city (Andersson, Armbrect & Lundberg 2008). Consequently, many people will be concentrated in one place, unlike in the World Cup when people spread over numerous cities. The concentration of people in the City of Rio de Janeiro implies that there will be pressure on the infrastructural facilities during the 2016 Olympics than during the 2014 World Cup. Therefore, the management of the 2016 Rio Olympics should not rely on the previous experience of the FIFA World Cup (Andersson, Armbrect & Lundberg 2008).

The IOC has set its requirements, which are different from those established by FIFA. The assessment of the pre-Olympics has indicated that about 49750 rooms will satisfy the IOC’s demands (Curi, Knijnik & Mascarenhas 2011). The sporting mega-events management also requires planning for the extreme situations. Rio de Janeiro has put in place the necessary plans of using condominium and cruise ships in case of the over demand for accommodation. In terms of transportation, the Brazilian authorities have plans to construct the roads linking the Olympic zones (Fourie & Santana-Gallego 2011).

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Financial Capacity of Rio de Janeiro to Host the Olympics

The preparation for the Olympics necessitated the Brazilian authorities to prepare a report on how it will finance the mega-event. Brazil reported that it had allotted about US $240 billion for the 2016 Olympics sporting mega-event (Haddad & Hahhad 2010). These finances were allocated from the Federal Governments Plan for Accelerated Growth (PAC). According to Haddad and Hahhad (2010), the federal government has offered the required financial support, educational developments, ecological conversation, and social programs for the poor among the other positive developments. This consideration for the poor implies that the management of the Olympics in Brazil has learnt from the past events, in which the wealthy were the only beneficiaries of the event (Atkinson et al. 2008).

Prior to the acceptance of the bid to host the Olympics, the Brazilian government had guaranteed three important things: to cover any possible economic shortfalls of the Organizing Committee of the Olympic Games (OCOG), finance OCOG and non-OCOG budget, and cover any refunds of the IOC advance payments (Curi, Knijnik & Mascarenhas 2011). Curi, Knijnik, and Mascarenhas (2011) point out that prior to granting the Olympics, the federal government has to ensure a strong financial backing.

Some of the revenue-generating activities expected during the mega-event include sponsorship sales, licensing and merchandising, and ticketing (Atkinson et al. 2008). According to Atkinson et al. (2008), the revenues generated from these activities will be complemented by the broadcast and commercial contributions secured by the IOC (Atkinson et al. 2008).

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The government or private sector expenditures on the infrastructure have been anticipated to encompass the already committed and continuing investments of about US $4 billion on the following projects: airport and subway construction and enhancement (Maennig & Zimbalist 2012). According to the financial analysis of the mega-event, the budget of the OCOG does not presume any capital contribution to the development of the legacy venues, other than for the coverage of the games (Maennig & Zimbalist 2012). According to the IOC, the balance of expenditures by OCOG is to be financed by the Brazilian public sector, which involves the funds from the government, state, and federal commitment. The financial plan and operating expenses of OCOG are expected to be about US $2.9 billion (Maennig & Zimbalist 2012). The budget included the capital investment in transportation and sports venues (Maennig & Zimbalist 2012).

The Security Capacity of Rio de Janeiro to Host the Olympics

Security is one of the key concerns for the IOC. The Brazilian government has the responsibility of cleaning up the areas deemed insecure in order to make them suitable for numerous tourists (Curi, Knijnik & Mascarenhas 2011). However, having hosted the 2014 FIFA World Cup, the government had partly, or wholly, addressed the issues relating to security. Accordingly, Rio de Janeiro is in good time to make numerous improvements before 2016. Curi, Knijnik, and Mascarenhas (2011) point out that the government has initiated some projects to improve the quality and capacity of the police in the preparation for the Olympic bid, as well as the FIFA World Cup. Besides improving the capability and quality of the police force, the Brazilian authorities are using another method in order to fight against the crimes by making international headlines with the invasion of favelas (Walker et al. 2010). For a region to be regarded a favela, it must have at least 51 houses. In other words, favelas refer to slums in Brazil, and often are regarded as settlements for the landless people. As of 2000, Rio de Janeiro had about 811 favelas, but it is likely that the number of them has increased since then (Walker et al. 2010).

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The slums are a threat to the 2016 Olympics because of the insecurity they pose. The security financing for Rio de Janeiro should necessary cover the employment of the Unidade de Policia Pacificadora (UPP) and other security forces (Andersson, Armbrect & Lundberg 2008). According to Fourie and Santana-Gallego (2011), without these forces, the slums can become the areas of drug and child trafficking. On the other hand, in the Brazilian slums, the drug traffickers might enforce the control and order in the community even in the absence of the UPP. The Brazilian government hopes to manage all the slums in Rio de Janeiro before the 2016 Olympics (Ma et al. 2011).

This paper has discussed the management of the Rio de Janeiro 2016 Olympics in the light of three crucial factors: finance, security, and infrastructure. Similar to a typical business, the success of Rio de Janeiro Olympics is also affected by the management of these factors. The infrastructure refers to the basic fundamental facilities and systems serving the city of Rio de Janeiro. These facilities include the transportation, communication, and power systems, among many others. In terms of finance, Brazil reported about allocating US $240 billion for the 2016 Olympics sporting mega-event. Some of the revenue-generating activities expected during the Olympics include sponsorship sales, licensing and merchandising, and ticketing. Security is a threat to the event because it might scare off the tourists from attending the event. The effective management of the three factors could result in the economic benefits for the whole country.